American Credit Co. v. Stuyvesant Insurance Co.

173 S.E.2d 523 (1970) 7 N.C. App. 663

AMERICAN CREDIT COMPANY, Inc.
v.
The STUYVESANT INSURANCE COMPANY, a Corporation, and Wallace B. Clayton, trading and doing business as Granville County Farm Bureau.

No. 7014DC75.

Court of Appeals of North Carolina.

May 6, 1970.

Spears, Spears, Barnes & Baker, by Robert F. Baker, Durham, for defendants appellees.

Edwards & Manson, by W. Y. Manson, Durham, for plaintiff appellant.

HEDRICK, Judge.

The first question presented on this appeal is whether the court committed error in ruling upon the defendant's motion to vacate the judgment.

In Moore v. W. O. O. W., Inc., 250 N.C. 695, 110 S.E.2d 311 (1959), the North Carolina Supreme Court considered a case similar to the one now before us. In that case a motion to set aside a default judgment was denied for want of evidence of a meritorious defense. Several months later, but within one year of the date of the entry of the judgment by default final, the defendant brought another motion on the same ground and introduced evidence of a meritorious defense which was not available at the time of the previous hearing. At the second hearing Judge Paul entered an order setting aside the default judgment. In affirming the judgment of the court below, Parker, J. (later C. J.), stated:

"In Collister v. Inter-State Fidelity Building & Loan Ass'n., 44 Ariz. 427, 38 P.2d 626, 98 A.L.R. 1020, the Court held that a court's denial of a motion to vacate a default judgment is not res judicata as to a subsequent motion to vacate it on a different ground."

In the present case the defendant filed a motion to set aside the default judgment on the grounds of excusable neglect and meritorious defense. Judge Lee, in a judgment dated 12 September 1969, denied the motion and stated:

"That this Court having found as a fact that no excusable neglect exists does not make any further finding insofar as an alleged meritorious defense is concerned."

When the first motion to set aside the judgment was denied the defendant filed another motion entitled "MOTION TO VACATE JUDGMENT." This motion asked that the default judgment be vacated on the ground that the complaint failed to state a cause of action against the defendant. It is well established in North Carolina that no appeal lies from one judge of the superior court to another. Neighbors v. Neighbors, 236 N.C. 531, 73 S.E.2d 153 (1952). However, this principle is not applicable to the present case. On the facts of this case, Judge Moore did not undertake to review or to overrule the judge who entered the previous order. The defendant was not estopped from making his second motion before Judge Moore on the ground of meritorious defense since there had been no prior ruling on that motion by any judge of the district court.

The second question presented is whether the complaint stated a cause of action against the defendant Clayton.

In Lowe's of Raleigh, Inc. v. Worlds, 4 N.C.App. 293, 166 S.E.2d 517 (1969), we find the following:

"A default judgment admits only the averments in the complaint, and the defendant may still show that such averments are insufficient to warrant the plaintiff's recovery. Beard v. Sovereign Lodge, 184 N.C. 154, 113 S.E. 661. A complaint which fails to state a cause of action is not sufficient to support a default judgment for plaintiff. G.S. § 1-211; Cohee v. Sligh, 259 N.C. 248, 130 S.E.2d 310; Presnell v. Beshears, 227 N. C. 279, 41 S.E.2d 835. Accordingly, if the complaint in the present action failed to state a cause of action as against Lois Worlds, the default judgment against her cannot be supported and must be set aside even without any showing of mistake, surprise or excusable neglect."

Plaintiff, in its complaint, alleged that one Arthur Ray Reed purchased an automobile which was to be financed by the plaintiff. As a necessary part of the financing agreement, Reed was to provide collision coverage on the automobile naming the plaintiff as loss payee. Reed informed the plaintiff in August, 1968, when they were discussing the financing agreement, that he had already purchased a collision policy and gave the plaintiff a copy of the policy which became effective 31 July 1968. Subsequently plaintiff contacted the defendant Clayton and received a promise from him to name plaintiff as loss payee under the insurance policy which had been issued to Reed. Upon these alleged facts the plaintiff sought to assert a cause of action against the defendant for breach of contract. "A contract, in order to be enforceable, must be supported by consideration, and want of consideration constitutes legal excuse for non-performance of an executory promise. A mere promise, without more, is unenforceable." 2 Strong, North Carolina Index 2d, Contracts, § 4. In Matthews v. Matthews, 2 N.C.App. 143, 162 S.E.2d 697 (1968), the Court stated:

"A valuable consideration is necessary to the validity of a contract not under seal, and it is necessary for the pleader to allege such facts as will enable the Court to see that there was a valuable consideration. McIntosh, N.C. Practice 2d, Sec. 1067."

The plaintiff's allegations show no consideration for the promise by Clayton to name the plaintiff as loss payee on the insurance policy purchased by Reed.

The plaintiff contends that by the allegations contained in paragraph 15 of the complaint it has stated a cause of action as a third party beneficiary of the insurance policy. In paragraph 15 the plaintiff stated that on 7 March 1969 the automobile was damaged to the extent that it was considered a total loss, that Reed is still indebted to the plaintiff in excess of $2,400.00 and that because of this the plaintiff is a third party beneficiary of the policy. North Carolina does recognize the existence of third party contracts. In 2 Strong, North Carolina Index 2d, Contracts, § 14, it is stated:

"Where two persons enter into a contract for the benefit of a third person, such person may maintain an action for breach of the contract, and may recover, assuming the existence of a valid and enforceable agreement.

* * * * * *

"In order for a third person to sue, it is required that the contract be made for his benefit."

The allegations in this complaint do not state a cause of action by the plaintiff as a third party beneficiary of the insurance policy. There are no allegations that at the time the policy was issued it was intended to benefit anyone other than Reed. When Reed applied for the policy no financing agreement existed with the plaintiff and it is not alleged that Reed, at any time, asked the defendant Clayton to make the plaintiff the loss payee of the policy. In the absence of an allegation that the insurance policy was entered into for the benefit of the plaintiff we can find nothing in the complaint to show that the plaintiff was anything but a stranger to the contract.

The plaintiff also contends that the allegations contained in paragraph 14 of the complaint are sufficient to state a cause of action against the defendant for debt. The allegations in the complaint are not sufficient to do this since they show that the only debt owed is one by Reed, under the financing agreement, to the plaintiff. Plaintiff further contends that it has set forth a cause of action against the defendant because of the assignment by Reed of his interest and claims against the defendant. The facts, as alleged, fail to show any claim by Reed against the defendant Clayton. The plaintiff, in its complaint, alleged that Reed went to Clayton and asked him to get him an insurance policy to cover collision and comprehensive losses and that Clayton did obtain such a policy from The Stuyvesant Insurance Company. Once Clayton, as agent, obtained the insurance policy for Reed he had fulfilled his obligations.

The complaint failed to state a cause of action against the defendant Wallace B. Clayton and cannot support a default judgment against him. He was entitled to have the default judgment vacated. For the reasons stated above, the judgment of the District Court of Durham County is affirmed.

Affirmed.

CAMPBELL and PARKER, JJ., concur.