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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Charles v. Stout (9/13/2013) sp-6824

Charles v. Stout (9/13/2013) sp-6824

         Notice:  This opinion is subject to correction before publication in the PACIFIC  REPORTER .  

         Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 303  

         K  Street,  Anchorage,  Alaska  99501,  phone  (907)  264-0608,  fax  (907)  264-0878,  e-mail  


GAROLD CHARLES,                                           )  

                                                          )    Supreme Court No. S-14678  

                           Appellant,                     )  

                                                          )    Superior Court No. 1KE-10-00102 CI  

         v.                                               )  

                                                          )    O P I N I O N  

ANTHONY STOUT, TARA LORAINE                               )  

STOUT, and CREDIT UNION 1,                                )  

                                                          )   No. 6824 - September 13, 2013  

                           Appellees.                     )  


                  Appeal from the  Superior Court of the State of Alaska, First  


                  Judicial District, Ketchikan, William B. Carey, Judge.  

                  Appearances:    Charles  W.  Coe,  Law  Office  of  Charles  W.  

                  Coe, Anchorage, for Appellant.  No appearance by Appellees  


                  Anthony  Stout  and  Tara  Loraine  Stout.  Cynthia  L.  Ducey,  


                  Delaney Wiles, Inc., Anchorage, for Appellee Credit Union 1.  

                  Before:  Fabe, Chief Justice, Winfree, Stowers, Maassen, and  


                  Bolger, Justices.   

                  MAASSEN, Justice.  


                  Garold Charles was in an accident while riding as a passenger in a vehicle  


belonging to Tara and Anthony Stout.  Charles brought negligence claims against the  

Stouts and Credit Union 1, the lienholder on the Stouts' vehicle.  Credit Union 1 moved  


for summary judgment.  Charles opposed the motion, relying on testimony from Tara's  


----------------------- Page 2-----------------------

deposition and contending in part that he was a third-party beneficiary of an alleged  


contract between Credit Union 1 and the Stouts by which the credit union agreed to  


provide  liability  insurance.             The  superior  court  struck  Tara's  testimony  and  granted  

summary judgment to Credit Union 1.  Charles appeals.  We affirm.  


                    Garold Charles filed a complaint against Anthony Stout, Tara Loraine Stout,  

and Credit Union 1 seeking compensation for injuries he allegedly received in a 2008  


rollover accident on the Tongass Highway.  The Stouts were married but separated at the  


time of the accident and held joint title to the car.  Charles's complaint alleged that he was  


riding  as  a  passenger  in  the  Stouts'  vehicle  and  that  Anthony  was  driving  while  

intoxicated.  It alleged that Anthony lost control, the vehicle rolled several times, and  


Anthony then fled the scene. The complaint alleged not only that Anthony was negligent  


in driving the car but also that Tara and Credit Union 1 both had ownership interests in  


the car and were liable for negligently entrusting it to Anthony.  Anthony did not answer  


the complaint and was eventually defaulted, but Credit Union 1 and Tara both answered,  

Tara acting pro se.   

                    Credit  Union  1  moved  for  summary  judgment,  arguing  that  its  only  


involvement with the car was as lender and lienholder, which by law is not a sufficient  


basis  for  liability.     In  response,  Charles  sought  to  depose  Tara  about  the  liability  

insurance she may have purchased from Credit Union 1 at the time she financed the  


           1         Credit Union 1 relied on AS 45.29.402, which provides that "[t]he existence  

 of a security interest, agricultural lien, or authority given to a debtor to dispose of or use  

 collateral, without more, does not subject a secured party to liability in contract or tort  


 for the debtor's acts or omissions."  

                                                              -2-                                                          6824  

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                     Tara did not have counsel at her deposition.  In response to questions by  


Charles's attorney, she testified that she thought she had contracted with Credit Union 1  


for liability insurance in addition to loan financing.  She testified that she switched from  


an insurance company to Credit Union 1 because the credit union's insurance was "a lot  


cheaper  [and]  a  lot  more  convenient."    She  testified  that  she  thought  she  had  "the  


minimum insurance," "the normal coverage of what would be [necessary in order to be]  

legal to drive."  She also testified that when she changed her insurance over to Credit  


Union  1,  the  new  insurance  did  not  cover  Anthony  because  the  two  of  them  "were  

separated completely" and Anthony was in jail.  She testified that when Anthony later  


took possession of the vehicle, before the accident, she informed Credit Union 1 that she  


did not own the vehicle anymore, at which point the credit union changed "the payments  

and the insurance and all that" from her name to Anthony's.  

                     Soon after Credit Union 1's attorney began her cross-examination, Tara  


asserted that she did not want to continue without an attorney and that she wished to leave  


the deposition.  The attorneys for Credit Union 1 and Charles both advised her against it,  


warning her that if she left before the deposition was completed she could be held liable  


for expenses and monetary sanctions.  After several contentious exchanges Tara left the  


deposition, and Credit Union 1's attorney was unable to complete her cross-examination.  

The superior court subsequently ordered Tara to appear again, but she failed to attend  

either her re-noticed deposition or a hearing on sanctions.  


                     Charles relied heavily on Tara's deposition testimony in his opposition to  

the pending motion for summary judgment, in which he also raised several new theories  


of liability.  The superior court allowed Charles to amend his complaint to include these  


new theories. The amended complaint asserted that Charles was a third-party beneficiary  


of an agreement by Credit Union 1 to provide liability insurance to the Stouts, and it  


included claims for breach of contract and breach of the covenant of good faith and fair  

                                                                  -3-                                                         6824

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dealing.  The superior court expressly stated that it would consider these additional claims  


when deciding Credit Union 1's motion for summary judgment.  

                    Credit Union 1 moved to strike Tara's deposition testimony.  The superior  

court granted the motion, both as a sanction against Tara and under Alaska Civil Rule  


32(b), which provides that "objection may be made at the trial or hearing to receiving in  


evidence any deposition or part thereof for any reason which would require the exclusion  


of the evidence if the witness were then present and testifying."  The court decided that  

excluding  the  testimony  was  necessary  to  protect  Credit  Union  1's  right  to  cross- 

examination - thwarted by Tara's early departure from the deposition - and because  


the testimony was hearsay not falling within any exception to the hearsay rule.  The court  


subsequently granted the motion for summary judgment, observing that the only evidence  


raised in opposition was the deposition testimony, which had been stricken, and that even  


when that evidence was considered, Credit Union 1 was entitled to judgment as a matter  


of law.  Charles appeals the decision to strike Tara's deposition testimony and the grant  

of summary judgment.   



                    We review grants of summary judgment de novo, "draw[ing] all factual  


inferences in favor of, and view[ing] the facts in the light most favorable to, the party  


                                                                            We will affirm the grant of summary  

against whom summary judgment was granted."                                               

judgment when the record presents no genuine issues of material fact and the movant was  


entitled to judgment as a matter of law.3  


            2         Interior  Cabaret,  Hotel,  Rest.  &  Retailers  Ass'n  v.  Fairbanks  N.  Star  

 Borough , 135 P.3d 1000, 1002 (Alaska 2006) (citing Rockstad v. Erikson , 113 P.3d  

  1215, 1219 (Alaska 2005)).  

            3         Smith v. State      , 282 P.3d 300, 303 (Alaska 2012) (quoting                         Cragle v. Gray,  


                                                                 -4-                                                        6824

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                    There Is No Genuine Issue Of Material Fact As To Whether Charles  

                    Was An Intended Third-Party Beneficiary Of A Contract To Provide  



                    There is no evidence in this case of an actual, written insurance contract that  


would provide liability coverage for the Stouts' vehicle at the time of the accident.  What  


Charles alleges instead is a promise to provide  such insurance - a promise that Credit  


Union 1 allegedly breached.  Inherent in this theory, according to Charles, are genuine  


issues of fact that preclude summary judgment in Credit Union 1's favor:  whether Credit  


Union 1 actually made this promise and whether Charles himself was an intended third- 


party beneficiary of the promise.  Even assuming the existence of a contract to provide  

liability insurance, we conclude that Charles has failed to raise a genuine issue of material  


fact as to whether he was a third-party beneficiary of that contract with the right to bring  

suit for its alleged breach.  

                    Charles bases his rights as a third-party beneficiary on the theory that the  

Stouts' liability insurance policy, had one existed, would have included underinsured  


motorist (UIM) coverage unless the Stouts explicitly declined it,  and such coverage, had 



it existed, would have been for his benefit.  Citing Ennen v. Integon Indemnity Corp. ,  


which we decided after the grant of summary judgment in this case, Charles asserts that  


as the intended beneficiary of this never-placed UIM coverage, he has a cause of action  


 206 P.3d 446, 449 (Alaska 2009)).  

           4         See AS 28.20.445(e)(3) (providing that the UIM coverage that is required     

 to be offered "may be rejected by the insured in writing").  

           5         268 P.3d 277 (Alaska 2012).  

                                                                -5-                                                        6824

----------------------- Page 6-----------------------


against Credit Union 1 for its breach of the promise to provide the insurance in the first  


                    Intended third-party beneficiaries have enforceable rights in an insurance  



contract, including the right to bring claims for bad faith against the insurer. 


beneficiaries, such as tort victims, lack those rights.   We decided in Ennen that an injured  

passenger was an intended third-party beneficiary because the vehicle owner's uninsured  

motorist policy "defined 'insured' as including '[a]ny person occupying your covered  


auto with the permission of the named insured.' "   Because "[b]oth policyholders and  


additional insureds are 'insured,' " we held that both "are entitled to bring causes of  


action for bad faith."    


                    In this case there is no written agreement that Credit Union 1 would provide  


liability insurance, nor is there any insurance policy from which third-party rights could  

be extrapolated.  Charles relies on the written loan agreement between the Stouts and  


Credit Union 1, but the agreement adds nothing to his claim.  Under the loan agreement,  


the Stouts agreed to maintain insurance on the vehicle, with Credit Union 1 having the  


right but not the obligation to secure insurance at the Stouts' cost if the Stouts failed to  

                               10  Under the agreement, the Stouts also acknowledged that any such  

secure it themselves. 

           6         Id. at 284.  

           7         Id.  

           8         Id. at 280 (alteration in original).  

           9         Id. at 286.  

           10        The  record  indicates  that  Credit  Union  1  did  invoke  its  right  to  place  

 insurance on the vehicle to protect its interests in the collateral.  The letter Credit Union  


  1 sent to the Stouts apprising them of this stated, "This policy does not insure against  


 bodily  injury,  death,  or  property  damage  liability  and  does  not  satisfy  Alaska's  


                                                                 -6-                                                        6824

----------------------- Page 7-----------------------

insurance  placed  by  Credit Union  1  would  be  primarily  for  the  credit  union's  own  


protection, and that "this insurance does not cover liability or personal injury protection  


to [the Stouts] if the vehicle is involved in an accident."  


                    Charles contends that this language in the loan agreement left the Stouts  

uncertain as to whether Credit Union 1 would be providing insurance, and if so of what  


type.  He further relies on Tara's testimony that employees of Credit Union 1 led her to  


believe that it was providing coverage that "would make it legal for her to drive, as well  


as[] cover the vehicle damage and liability."  But we can assume these facts to be true and  


still find lacking a necessary element of Charles's claim:  that Credit Union 1's promise  


to Tara that it would provide liability insurance was intended at least in part to be for  

Charles's benefit.  


                    We find no support for such an argument in Tara's disputed deposition  


testimony, which we have thoroughly reviewed.  Although Tara did testify, with some  

confusion  and  internal  inconsistency,  that  she  thought  Credit  Union  1  had  agreed  to  


provide liability insurance, she did not testify that either she or Credit Union 1 intended  

                                                                                   11  Indeed, as noted above, Tara  

that the insurance benefit anyone other than themselves.     

testified that the insurance did not even cover her then-husband Anthony, from whom she  


was separated when she allegedly procured it, and that when Anthony took possession of  


the vehicle, sometime before the accident in which Charles was injured, the credit union  

"took it out of [her] name, the payments and the insurance and all that."  


 mandatory motor vehicle liability insurance requirements of AS[] 28.22.001."  

           11        See  Ennen ,   268  P.3d   at  284  ("[T]he  tort  victim  only  benefits  from  the  

 existence of the insurance contract indirectly: The insured did not purchase the policy  

 with the intention to benefit the tort victim; rather, the insured purchased the policy to  


 protect the insured from tort liability.").  

                                                                -7-                                                        6824

----------------------- Page 8-----------------------


                  Because  there  is  no  evidence  that  Charles  was  an  intended  third-party  

beneficiary of an alleged contract to provide insurance, we do not need to reach the  

underlying issue of whether such a contract even existed.12  


                  We AFFIRM the superior court's grant of summary judgment.  

          12       We also do not reach the following issues: (1) whether the superior court  

 erred in striking Tara's deposition testimony; (2) whether there are genuine issues of  


 material fact regarding breach of contract and breach of the covenant of good faith and  


 fair dealing; (3) whether the superior court improperly relied on Tara's credibility for  

 purposes of summary judgment; and (4) whether the superior court erred in considering  


 whether Anthony was a permissive driver.  

                                                          -8-                                                      6824  

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