3 F.3d 939 (6th Cir. 1993), 92-1576, Comerica Bank v. Lexington Ins. Co.
|Citation:||3 F.3d 939|
|Party Name:||COMERICA BANK, Plaintiff-Appellant, v. LEXINGTON INSURANCE COMPANY, Defendant-Appellee.|
|Case Date:||July 02, 1993|
|Court:||United States Courts of Appeals, Court of Appeals for the Sixth Circuit|
Argued May 6, 1993.
Eric A. Linden (argued), Susan M. Bakst (briefed), Jaffe, Raitt, Heuer & Weiss, Detroit, MI, for plaintiff-appellant.
Kenneth M. Zorn (argued & briefed), Michael C. McKinnon, Reynolds, Beeby, Magnuson & Kenny, Detroit, MI, for defendant-appellee.
Before: KENNEDY and SILER, Circuit Judges, and CONTIE, Senior Circuit Judge.
CONTIE, Senior Circuit Judge.
Plaintiff-appellant, Comerica Bank, appeals the district court's grant of summary judgment to defendant-appellee, Lexington Insurance Co., in this diversity insurance contract case.
This case involves an insurance coverage dispute between plaintiff Comerica and defendant Lexington Insurance Co. On January 1, 1984, Comerica purchased a Trust Department Errors and Omissions Policy issued by Lexington (hereinafter, "the insurance policy"). The policy covered claims made against the bank from January 1, 1984 until January 1, 1987.
The actions taken by the bank's trust department relating to this lawsuit are as follows: On May 6, 1976, C. Carlton Prichard, the sole owner and shareholder of Earl C. Smith, Inc. (hereinafter, "the company"), died testate. His will provided that his employee, Ronald C. Murrell, 1 would have the right of first refusal to purchase all of the capital stock of the company. Detroit Bank & Trust which is now Comerica Bank (hereinafter, "the bank") was appointed executor of Prichard's estate.
The bank recognized the right of first refusal in Mr. Murrell, and in order to establish the fair market value of the Smith company stock, solicited bids. The highest bid ($2,850,000) was received from Paragon Transport, Inc. (hereinafter, "Paragon"). In a letter of November 17, 1976, Detroit Bank & Trust advised Mr. Murrell that he had until December 15, 1976 to purchase the stock for $2,850,000 and Murrell exercised his right of first refusal by tendering a $50,000 deposit.
On January 21, 1977, Murrell notified the executor of the trust that Manufacturer's National Bank, one of the banks from which he had been seeking financing, had rejected his loan application. On January 21, 1977, Paragon increased its offer. On January 24, 1977, Detroit Bank & Trust advised Murrell in writing that his right to consummate the stock purchase had been terminated.
Although not objecting immediately to the termination of his right of first refusal, two days later, on January 26, 1977, Mr. Murrell wrote to the executor of the trust asserting the continued existence of his right to the stock. He continued to assert his right to purchase the stock and made efforts to obtain financing from both Michigan and out-of-state banks. A loan application was already before the Central Loan Committee of Michigan National Bank of Port Huron and was approved on February 2, 1977.
However, in the meantime on January 24, 1977 the bank had accepted the Paragon offer without any condition concerning Mr. Murrell's right of first refusal. On January 28, 1977, Murrell initiated an action in St.
Clair County Probate Court to prevent the sale of the stock to Paragon and to require sale to himself.
On February 28, 1977, the St. Clair County Probate Court ruled that the bank, as executor of the estate, had improperly terminated Murrell's right of first refusal and issued a preliminary injunction, enjoining the sale of stock to anyone other than Murrell. 2 On March 10, 1977, the bank entered into an agreement concerning the sale of the stock to Murrell. At this point, the bank had entered into two legally enforceable contracts for the sale of the same stock with two different parties--Murrell and Paragon.
On July 27, 1977, Paragon filed suit in the St. Clair County Circuit Court against Detroit Bank & Trust as executor of the estate of C. Carlton Prichard. The complaint alleged that the bank had breached its contract to sell the stock to Paragon and sought specific performance or money damages. The litigation was stayed pending the appeal of the St. Clair County Probate Court injunction prohibiting the sale of the stock to anyone but Murrell. After the 1981 Michigan Supreme Court decision, ordering the sale of the stock to Murrell, Paragon's action for breach of contract proceeded to trial. Ultimately, a judgment of approximately $2,700,000 against the bank as executor of the estate was entered in July 1986. After Paragon had been awarded over 2.7 million in money damages in its action against the estate for Comerica's breach of its contract to sell the Smith company stock to Paragon, there was approximately only $600,000 left in the estate to satisfy the judgment.
On October 10, 1986, the beneficiaries of the Prichard estate filed a petition in St. Clair County Probate Court to surcharge and remove the bank as executor of the estate due to alleged mishandling of the estate. The petition alleged that the bank acted wrongfully in accepting the offer of Paragon to purchase the Smith company stock while Murrell's right of first refusal was in effect. It also alleged that as a result of the actions of the bank, the estate was embroiled in litigation instituted by Murrell and Paragon. 3 The petition demanded surcharge against Comerica of all judgments, legal fees, and expert witness fees resulting from the litigation, and all executor fees paid by the estate to Comerica.
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