Shew v. Southern Fire & Casualty Co.

298 S.E.2d 380 (1983)

Johnny Calvin SHEW and Junior Brotherton
v.
SOUTHERN FIRE & CASUALTY COMPANY and Iredell County.

No. 543A82.

Supreme Court of North Carolina.

January 11, 1983.

Edwin G. Farthing, Hickory, for defendant-appellant.

Hall & Brooks by John E. Hall and William F. Brooks, Wilkesboro, for plaintiff-appellee.

MEYER, Justice.

The sole issue before us is whether the defendant, Southern Fire & Casualty Company, is legally obligated under a contract of insurance to reimburse the plaintiffs for monies paid in restitution assessed as a result of a criminal judgment against the plaintiff Shew. We hold that it is not.

The Court of Appeals, in reversing the trial court's order granting summary judgment for the defendant Company, reasoned as follows:

Without question, had Iredell County chosen to sue Shew and Brotherton ... among other necessary matters, Southern Fire & Casualty Company would have assumed its responsibility to defend the suit and would have paid any judgment rendered against Shew and Brotherton. Here, plaintiffs simply elected to pay damages to Iredell County when Southern Fire & Casualty Company elected not to do so and to sue for reimbursement. For practical purposes, plaintiffs stand in the shoes of Iredell County prior to recovery of the damages with the same rights and subject to the same defenses. Under these circumstances, the purpose of liability insurance, to protect those damaged by the negligent operation of an automobile, is fulfilled by allowing coverage under the policy. See Harrelson v. State Farm Mutual Automobile Insurance Co., 272 N.C. 603, 158 S.E.2d 812 (1968); see also G.S. 20-309 to -319.

58 N.C.App. at 642, 294 S.E.2d at 236.

As Judge Becton pointed out in his dissenting opinion:

The majority's resolution of this appeal overshadows several practical problems. First, the insurance company is not a party to the criminal action and, even if it knew about the criminal action, it could not participate. Second, although the burden of proof is more onerous in criminal cases than in civil cases (and that was not a factor here, since Shew pleaded guilty), there is usually no defense (or not as vigorous a defense) on the issue of damages at criminal trials since the criminal defendant is naturally more concerned about guilt or innocence. Third, restitution is completely within the discretion of the trial court. Defendant may be correct when it argues: "If criminal restitution is covered by insurance,... a Homeowner's Liability Insurance Policy could be called upon to pay restitution when an insured homeowner intentionally and criminally shoots someone on his property and restitution is provided for the victim or the victim's family." Fourth, although contributory negligence on the part of the Sheriff's Department could be raised in Shew's lawsuit against the insurance company, the insurance company's suggestion which follows, that the Sheriff's Department was not acting reasonably and prudently, graphically shows why the resolution of the contributory negligence issue should be made in a civil trial prior to any judgment of restitution in a criminal action.

58 N.C.App. at 644, 294 S.E.2d at 237.

Putting aside the practical problems alluded to by Judge Becton, we must first emphasize that at no time has plaintiffs' civil liability to Iredell County been addressed. We cannot, nor should we now attempt to, predict the results of a civil action brought by the County for damages it suffered as a result of plaintiff Shew's intentional acts. Rather, this is an action brought by an insured for recovery of monies paid as a result of a criminal judgment and an order to pay restitution as a condition of probation.

G.S. § 15A-1343(b)(6) permits the court, as a condition of probation, to require a defendant to "[m]ake restitution or reparation for loss or injury resulting from the crime for which the defendant is convicted." Reimbursement to Iredell County for the property damaged by Shew was in the nature of reparation—payment for the restoration to good condition of persons or property so injured. See Annot., Probation —Reparation to Injured Victim, 79 A.L. R.3d 976 (1977). The amount determined must be limited to that supported by the evidence. G.S. § 15A-1343(b)(6). It may, but does not necessarily represent the amount of damages that might be recoverable as a result of a civil action. See Annot., 79 A.L.R. 3d 976.

We do not agree with the plaintiffs' position, as adopted by the Court of Appeals, that the sum of $5,748.00 paid to Iredell County in restitution as a condition of probation in order to escape an active jail sentence can properly be viewed as somehow analogous to damages incident to a civil judgment. The "duty to pay reparations does not affect, and is not affected by, the victim's right to institute a civil action for damages against the defendant based on the same conduct, although, if the victim recovers, a setoff might be ordered for the money already received by the victim under the condition of probation." 79 A.L.R. 2d at 992, citing to People v. Stacy, 64 Ill.App.2d 157, 212 N.E.2d 286 (1965). Although we do not address the question here, Judge Collier's order contemplates at least the possibility that civil liability could be imposed. Restitution should not be used as a substitute for determination in the proper forum of a defendant's civil liability:

Criminal and civil liability are not synonymous. A criminal conviction does not necessarily establish the existence of civil liability. Civil liability need not be established as a prerequisite to the requirement of restitution as a probation condition....

People v. Heil, 79 Mich.App. 739, 748, 262 N.W.2d 895, 900 (1977). See People v. Pettit, 88 Mich.App. 203, 276 N.W.2d 878 (1979). In fact, this Court has drawn a distinction between restitution as a condition of probation, and damages, which might possibly be assessed as the result of a civil action, by stating in State v. Simmington, 235 N.C. 612, 614, 70 S.E.2d 842, 844 (1952): "While the court was without jurisdiction to compel defendant to pay the damages inflicted on penalty of imprisonment, this does not mean that it might not suspend the execution of the sentence of imprisonment on condition the defendant compensate those whom he had injured." There is, however, authority to support, as a condition of probation, a requirement that defendant have the financial ability to pay a judgment rendered against him in a civil action for damages. People v. Marks, 340 Mich. 495, 65 N.W.2d 698 (1954); People v. D'Elia, 73 Cal. App. 2d 764, 167 P.2d 253 (1946). Furthermore, in Flores v. State, 513 S.W.2d 66 (Tex.Cr.1974), the court affirmed a judgment which placed defendant on probation on condition that he pay restitution to an insurance company as reimbursement for medical expenses paid to the victim of the crime.

Having recognized the crucial distinction between an insurance company's obligation to pay damages pursuant to a civil judgment, as opposed to restitution ordered as a condition of a criminal probationary judgment, we reach the threshhold question: whether the defendant Company is legally obligated under the terms of the insurance contract to pay (or reimburse plaintiff for his payment of) restitution assessed as a result of the criminal probationary judgment against Shew.

Unlike a judgment in a civil action, here Shew was not "legally obligated" to make restitution. It was clearly a condition of his probation which he voluntarily undertook in order to avoid imposition of an active sentence. As we stated in State v. Simmington, 235 N.C. 612, 614, 70 S.E.2d 842, 844, "[s]uch disposition of the case merely gave him the option to serve his sentence or accept the conditions imposed .... If he was not content, he had the right either to reject the conditions or to appeal."

As an insurer has no legal obligation to defend a criminal proceeding brought against an insured arising out of the operation of an automobile causing injury or damages, see 6C J. Appleman, Insurance Law and Practice § 4431 (Buckley ed. 1979), so no obligation arises from the disposition of the criminal proceeding. Moreover, it is a basic proposition of public policy, requiring no citation of supporting authority, that an insured is not allowed to profit from his own wrongdoing. To require the defendant Company to reimburse plaintiffs for the amount ordered as restitution or to hold that the defendant Company was legally obligated to pay the amount to Iredell County would be tantamount to condoning insurance against the results and penalties of one's own criminal acts. This is against public policy. See 1 Couch on Insurance 2d § 1:36 (2d ed. 1959); see also 7 Blashfield Automobile Law and Practice § 291.1 (3d ed. 1966).

As a matter of law, defendant Company is under no legal obligation to its insured to pay restitution assessed as a result of a criminal judgment. We therefore hold that the trial judge properly granted summary judgment in favor of the defendant Company.

The decision of the Court of Appeals is reversed and the judgment of the trial court granting summary judgment in favor of the defendant Company is reinstated.

REVERSED AND REMANDED.