WINTER 1998

IN DECIDING ESTATE OF MULLIS V. MONROE OIL CO. et al.,
DID THE N.C. SUPREME COURT ANSWER A QUESTION
THAT WAS NOT ASKED?
Joseph E. Wall
Jordan Price Wall Gray Jones & Carlton

In its recent opinion in Estate of Mullis v. Monroe Oil Co. et al., the North Carolina Supreme Court handed down a decision that somewhat expands the potential liability of vendors of alcoholic beverages accused of selling liquor to underage purchasers. Upon reading the Court’s decision, I was reminded of one of two (mildly) humorous stories that my Calculus professor enjoyed telling. It seems that a student in Professor Smith’s Religion 101 class learned from an upperclassman that Professor Smith always asked the same question on the final exam; namely, "Who are the Major Prophets?" The student memorized the names of the Major Prophets, but, alas, this year the professor’s exam question was "Who are the Minor Prophets?" The student gamely answered: "I don’t know who the Minor Prophets are, but the Major Prophets are . . . . " It appears to me that, like the religion student, the Court did not answer the question posed, but instead answered the question it wished to answer. The Court traveled beyond the legal question that was presented by the appeal and issued what is essentially an advisory opinion that creates a new principle of common law, even though an essential fact necessary for application of the new principle was not before the Court in the case it was deciding. What was missing? Read on.

The case involved the alleged sales of beer by a convenience store and liquor by an ABC store to a 20-year old who later became intoxicated and drove a vehicle off the road and into a tree, killing himself and his three passengers. The estate of one of the passengers filed suit against the convenience store and the ABC store, alleging that they were liable for damages under the Dram Shop Act. That claim, however, failed because the suit was filed more than one year after the accident, and there is a one-year statute of limitations for lawsuits brought under the Dram Shop Act. In an effort to overcome this problem, the estate amended its complaint to allege that it had a claim on two other grounds: (1) that the sale to a minor was negligence per se under N.C.G.S. 18B-102 & 301 (which make the sale of alcoholic beverages to minors illegal); and (2) under principles of common law negligence. The suit was dismissed by the trial court, and the Court of Appeals upheld the dismissal stating that the exclusive remedy against a vendor for claims by an injured party based on the vendor’s sale to a minor who later consumes the alcoholic beverage, becomes intoxicated, and causes a motor vehicle accident is an action under the Dram Shop Act. The N.C. Supreme Court affirmed dismissal of the lawsuit, but it held that an action under the Dram Shop Act is not the exclusive remedy under such a factual scenario. The N.C. Supreme Court stated that a liquor vendor can be held liable for damages for common law negligence if: (a) it sells to an underage purchaser who is visibly intoxicated; (b) who can reasonably be expected to operate a motor vehicle; © who causes an accident resulting in injury to a third-party. Since such an action is outside the limits imposed by the Dram Shop Act, there is no limit or "cap" on the amount of damages that can be recovered by the injured party (there is a $500,000 cap on Dram Shop actions). As a result of this decision by the N.C. Supreme Court, vendors of alcoholic beverages accused of selling to an underage purchaser who injures a third-party while operating a motor vehicle are subject to suit based both on (a) a claim under the Dram Shop Act, and (b) a common law negligence claim.

So, why do I contend the Court went beyond the facts before it in rendering its opinion in Estate of Mullis? In Estate of Mullis there was no allegation that the purchaser was visibly intoxicated when he purchased alcoholic beverages from the convenience store or the ABC store. The legal issue before the Court was whether the Dram Shop Act is the exclusive remedy against a vendor of alcoholic beverages that sells alcohol to an underage purchaser who later consumes the alcohol, becomes intoxicated, negligently drives a motor vehicle, and causes injury to a third-party. The Court of Appeals had answered the question yes, and that was the only question before the Supreme Court. The Supreme Court recast the question, interjecting an element not presented by the case before it, and held that no, the Dram Shop Act is not the exclusive remedy if the underage purchaser was visibly intoxicated when he made the illegal purchase. By deciding the case in this manner, the Court made the law regarding potential liability for commercial vendors who sell to underage purchasers consistent with the law regarding potential liability for social hosts who provide alcoholic beverages to underage consumers. In Hart v. Ivey, 332 N.C. 299, 420 S.E.2d 174 (1992), the Court had held that a common law negligence claim could be based on the negligent provision of alcohol by a social host to an underage consumer, when the host knew or should have known that the guest was intoxicated and was going to drive a car after consuming the alcohol.

So, what are the lessons to be learned from the decision by counsel on both sides of a claim by an injured third-party arising out of a motor vehicle accident in which the tortfeasor was an underage purchaser of alcoholic beverages? First of all, the Dram Shop Act’s one-year statute of limitations is a trap for plaintiff’s counsel and a potential winner for defense counsel. The plaintiff in Estate of Mullis lost a winnable case by missing the one-year filing deadline. The statute of limitations must be pled as a defense, so it is important that defense lawyers be aware that Dram Shop cases are an anomaly when it comes to the applicable statute of limitations. Second, in cases involving factual situations similar to that in Estate of Mullis, plaintiff’s counsel will now routinely plead that the underage purchaser was visibly intoxicated in order to support their common law negligence claim. Make them come forward with evidence to support the allegation! In Estate of Mullis, the Supreme Court emphasized that the underage driver’s friends all testified in their depositions that he did not appear to be intoxicated during the hours prior to the accident. If there is no evidentiary support for the allegation of visible intoxication, the claim based on common law negligence should be thrown out by the trial judge.

In conclusion, in deciding Estate of Mullis the Supreme Court did answer a question not presented by the facts before it in order to announce a new principle of common law negligence that expands the potential liability of vendors of alcoholic beverages. Nonetheless, the damages cap limitation and the "statute of limitations trap" contained in the Dram Shop Act are still alive and well, and both continue to be available to defense counsel who encounter a fact situation similar to that before the Court in Estate of Mullis.