Hales v. North Carolina Insurance Guaranty Ass'n

MARTIN, Judge. The determinative issue on appeal is whether the 1986 judgment in the declaratory judgment action brought by William I. Hales against Interstate bars plaintiffs’ claims against the Association in the present case under the doctrine of res judicata. We hold that it does. The law with respect to summary judgment is well established. “ ‘Where a motion for summary judgment is granted, the critical questions for determination upon appeal are whether on the basis of the materials presented to the trial court, there is a genuine issue as to any material fact and whether the movant is entitled to judgment as a matter of law.’ ” Smith v. Jack Eckerd Corp., 101 N.C. App. 566, 568, 400 S.E.2d 99, 100 (1991), quoting Oliver v. Roberts, 49 N.C. App. 311, 314, 271 S.E.2d 399, 401 (1980), cert. denied, 276 S.E.2d 283 (1981). To meet this burden, the defendant must show as a matter of law that it is entitled to summary judgment in its favor by showing that there is no genuine issue of material fact concerning an essential element of the plaintiff’s claim for relief and that the plaintiff cannot prove the existence of that element. N.C. Gen. Stat. § 1A-1, Rule 56 (1990); Blue Ridge Sportcycle Co. v. Schroader, 60 N.C. App. 578, 299 S.E.2d 303 (1983). Also, a defendant is entitled to summary judgment if he can show that no claim for relief exists or that the plaintiff cannot overcome an affirmative defense or legal bar to a claim. Wilder v. Hobson, 101 N.C. App. 199, 398 S.E.2d 625 (1990). When a court of competent jurisdiction has entered a final judgment on the merits in an action, the doctrine of res judicata bars subsequent litigation of the same claim by the original parties or their privies. York v. Northern Hospital District, 96 N.C. App. [895] 456, 386 S.E.2d 99 (1989), disc. review denied, 326 N.C. 601, 393 S.E.2d 892 (1990). To prevail on the doctrine of res judicata, a party must show the following: (1) a previous suit resulted in a final judgment on the merits, (2) the present suit involves the same cause of action, and is (3) between the same parties or those in privity with them. Thomas M. McInnis & Assoc., Inc. v. Hall, 318 N.C. 421, 429, 349 S.E.2d 552, 557 (1986). A declaratory judgment has the force and effect of a final judgment or decree. McCabe v. Dawkins, 97 N.C. App. 447, 388 S.E.2d 571, disc. review denied, 326 N.C. 597, 393 S.E.2d 880 (1990); N.C. Gen. Stat. § 1-253 (1983). William I. Hales’ complaint for declaratory relief filed in 1985 involves the same cause of action as plaintiff’s complaint for declaratory judgment filed in 1991 as both actions seek to have the insurance policy at issue declared effective on 29 May 1985. The declaratory judgment in favor of Interstate in the earlier action constitutes a determination on the merits of the same claim, i.e., whether the policy was in effect on 29 May 1985. The first two requirements for application of the doctrine of res judicata are clearly met in this case. With respect to the requirement that the present action must involve the same parties as the previous action, or those in privity with them, a court will place substance over form and look beyond the nominal party whose name appears on the record as plaintiff and consider the legal questions raised as they may affect the real party or parties in interest. King v. Grindstaff, 284 N.C. 348, 357, 200 S.E.2d 799, 806 (1973). Privity exists where there is a mutual or successive relationship to the same property rights. Masters v. Dunstan, 256 N.C. 520, 124 S.E.2d 574 (1962); Goins v. Cone Mills Corp., 90 N.C. App. 90, 367 S.E.2d 335, disc. review denied, 323 N.C. 173, 373 S.E.2d 108 (1988). A party is privy if their interest has been legally represented in the prior proceeding. Masters, at 526, 124 S.E.2d at 578. In the present case, plaintiffs are in privity with William Hales. Plaintiffs have judicially admitted in prior pleadings, contained in the record in this case, that they are third party beneficiaries under the Interstate policy issued to Mr. Hales. The law implies privity of contract between the intended third-party beneficiary and the contracting party. Coastal Leasing Corp v. O’Neal, 103 N.C. App. 230, 405 S.E.2d 208 (1991); Johnson v. Wall, 38 N.C. App. 406, 248 S.E.2d 571 (1978). This privity of contract between [896] William Hales and plaintiffs at bar indicates a mutual or successive relationship to the same rights under the Interstate insurance policy. With respect to these rights, in his declaratory judgment action in 1985, William Hales sought to have the trial court declare his Interstate policy to be in effect on 29 May 1985 and to recover damages for Brian’s injuries. Thus, plaintiffs’ interests were legally represented in the 1985 action. G.S. § 58-48-35(a)(2) provides that defendant Association “shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent.” Accordingly, all requirements for privity are satisfied. Therefore, plaintiffs’ claims are barred by res judicata and the trial court properly granted the Association’s motion for summary judgment. Affirmed. Chief Judge ARNOLD and Judge ORR concur.