American Nursing Resources, Inc. v. Forrest T. Jones & Co., Inc.

• Decision Date: 04 June 1991
• Docket Number: No. WD,WD
• Citation: 812 S.W.2d 790
• Court: Missouri Court of Appeals
• Parties: AMERICAN NURSING RESOURCES, INC., Plaintiff, v. FORREST T. JONES & CO., INC., Appellant, v. John P. RYAN, Jr., Respondent, Antoinette S. Ryan, Respondent. 42678.

Page 790

812 S.W.2d 790

AMERICAN NURSING RESOURCES, INC., Plaintiff, v. FORREST T. JONES & CO., INC., Appellant, v. John P. RYAN, Jr., Respondent, Antoinette S. Ryan, Respondent.

No. WD 42678.

Missouri Court of Appeals,

Western District.

June 4, 1991.

Motion for Rehearing and/or Transfer to

Supreme Court Denied July 30, 1991.

Application to Transfer Denied Sept. 10, 1991.

William L. Allinder and William G. Zimmerman, Kansas City, for appellant.

John Michael Cronan, Kansas City, for John P. Ryan.

Walter J. O'Toole, Jr., Kansas City, for Antoinette S. Ryan.

Before LOWENSTEIN, P.J., and SHANGLER and MANFORD, JJ.

SHANGLER, Judge.

The cross-claimant Forrest T. Jones & Co., Inc. appeals the judgment entered on the verdict directed in favor of the defendants Ryan at the conclusion of the cross-claimant's case. The cross-claim is the remnant that remains of a pleading by American Nursing Resources as plaintiff to recover from the Ryans and their insurer the cost of nursing services furnished to Ms. Ryan.

The defendants John P. Ryan, Jr. and Antoinette S. Ryan, his mother, were insured under the Missouri Bar Major Medical Plan, a group policy of medical insurance issued by the New York Life Insurance Company. The cross-claimant Forrest T. Jones is the group administrator for the Plan issued by N.Y. Life. A written service agreement between them constitutes Jones as the agent for N.Y. Life for the payment of claims under the Plan. To pay claims under the service agreement Jones issues checks drawn on a N.Y. Life account. The agreement provides that Jones will indemnify N.Y. Life against loss resulting from its negligence in the administration of the Plan.

The defendant Antoinette Ryan, an insured under the Plan, was receiving home medical care. From January 1, 1986, through February 28, 1987, her son John Ryan was her agent as to matters of personal finances, medical treatment and insurance, and contracted with American Nursing Resources to provide the mother with that medical care. John Ryan, as her agent, also executed an assignment to American Nursing of benefits due the mother under the Plan. Notice of the assignment was received by Jones.

American Nursing provided nursing services under the agreement and assignment of benefits from March of 1986 to February of 1987. Jones processed the claims by American Nursing for the services rendered to Ms. Ryan and made payment under the assignment directly to American Nursing by checks drawn on the N.Y. Life account. Beginning in October of 1987, however, Jones failed to make payment on several claims submitted by American Nursing. Then, in January of 1988, without revocation of the assignment, Jones made remittance on many of the claims unpaid since October of 1987. These payments, however, were made directly to Ms. Ryan rather than to American Nursing. They were made by fourteen checks dated January 29, 1988, totaling $35,731.45, and drawn on the N.Y. Life account. Each check was accompanied by an "explanation of benefits" that it was in payment of services rendered by American Nursing for the designated period.

John Ryan obtained the checks from his mother, had his secretary endorse her name to them and then deposit them into a bank account in the names of both John and Antoinette Ryan. The son then transferred $30,000 of the money to an investment account in his own name. The son invested the money in stock and commodity options, and the money was lost. The authority of the son to use these checks as he did was not admitted by Ms. Ryan.

American Nursing was not paid for the services for which the fourteen checks issued, and so brought this action against the mother and son Ryan and N.Y. Life as defendants. N.Y. Life cross-claimed against the defendants Ryan to recover the money paid to Ms. Ryan by Jones and retained by them. N.Y. Life also made demand upon Jones under the service agreement to defend the action and for indemnity for any loss occasioned by the issuance of the checks directly to Ms. Ryan. Jones then paid American Nursing $36,843.45 in settlement and dismissal of its claim and action against N.Y. Life. This payment was the full indemnity owed by Jones to N.Y. Life under their service agreement.

Jones then moved the court to be substituted for N.Y. Life as party cross-claimant against the defendants Ryan. The motion was allowed. The plaintiff American Nursing agreed that the $36,843.45 received in settlement with Jones and N.Y. Life be applied to reduce its claim of $42,562.35 against the defendants Ryan. The trial court severed the American Nursing claim against the Ryans from the Jones cross-claim against the Ryans, which proceeded to trial first. The court directed a verdict against the cross-claim at the conclusion of Jones' case, and entered judgment accordingly. Thereafter, the claim of plaintiff American Nursing against the defendant Antoinette Ryan was adjudicated by the court, and a judgment of $10,011.50 was entered for American Nursing.

The judgment in favor of the defendants Ryan on the cross-claim of substituted party Jones thereupon became final for purpose of appeal. That appeal, now before us, is what remains of the litigation.

The direction of a verdict was proper only if upon view of the evidence in the light most favorable to the non-moving party, reasonable minds could not differ as to the proper verdict. Fricke v. Valley Prod. Credit Ass'n, 721 S.W.2d 747, 752[1, 2] (Mo.App.1987). The facts already recited are given most favorably to the theory of the cross-claim, the right of Jones to have subrogation against the Ryans.

The declared ground of the directed verdict was that at the time Jones made the $36,843.45 payment to American Nursing, Jones was under no legal obligation to American Nursing as to any debt, so that the payment was made as a volunteer. The court reasoned that under the terms of the Plan, the contractual obligation of N.Y. Life was to pay the medical benefits to Ryan. That payment was made, and thereafter N.Y. Life never "ha[d] to pay more than they were legally obligated to pay under the contract of insurance." The court reasoned also that the obligation for indemnity by Jones to N.Y. Life for negligent payment never came into operation because N.Y. Life paid any benefits due under the Plan only once, so that there was no loss to indemnify. Thus, Jones paid no debt for which N.Y. Life was answerable and there was no right of N.Y. Life against the Ryans to which Jones could succeed by subrogation.

I. The Right to Subrogation

Subrogation simply means the substitution of another person in the place of the creditor, so that the person in whose favor subrogation is exercised succeeds to the right of the creditor in relation to the debt. State Sav. Trust Co. v. Spencer, 201 S.W. 967, 969 (Mo.App.1918). It is the mechanism whereby the equity of restitution of one person is worked out through the legal rights of another. D. Dodds, Remedies § 4.3, p. 251 (1973); Kroeker v. State Farm Mut. Auto. Ins. Co., 466 S.W.2d 105, 110[2-4] (Mo.App.1971). The right of subrogation accrues to a person who has paid the debt or obligation for which another is primarily responsible. 73 Am.Jur.2d Subrogation § 26 (1974). The person who claims subrogation, however, must have acted to make the payment under the compulsion of a legal liability or to protect some other interest. Cole v. Morris, 409 S.W.2d 668, 670 (Mo.1966); Quality Wood Chips, Inc. v. Adolphsen, 636 S.W.2d 94, 97 (Mo.App.1982). A person who intervenes to pay a debt for which another is primarily responsible, but officiously and without legitimate reason, acts as a volunteer and is not entitled to be subrogated to the position of the creditor. Loman v. Harrelson, 437 S.W.2d 123, 126[2, 3] (Mo.App.1968); Frago v. Sage, 737 S.W.2d 482, 483[1-5] (Mo.App.1987).

The trial court determined from the evidence presented during the case-in-chief, that Jones did not prove that the payment made to American Nursing was to protect an interest or compelled by legal obligation, and so directed a verdict against the cross-claim for subrogation. The premise of the adjudication was that N.Y. Life paid no more than it was "legally obligated to pay under the contract" so that, as a substituted party, Jones had no more ground for subrogation that did N.Y. Life. The train of reasons that led the court to determine that Jones acted without legitimate occasion, and so as a volunteer, falters on the assumption that the legal obligation of N.Y. Life under the Plan was to pay the benefits to Antoinette Ryan, and then goes astray by the neglect of the evidence of the assignment of those benefits to American Nursing.

The son as agent for the mother, Antoinette Ryan, contracted with American Nursing to provide her with medical care, and executed an assignment to the health care provider of the benefits due the mother under the Plan. In the course of the declaration of judgment, the trial court assumed the validity of the assignment. There is no dispute of that evidence as fact, and we assume it as found on this review. We also assume as an intendment of the evidence that the notice to the agent Jones of the assignment was also notice to the principal N.Y. Life.

An assignment is a contract between the assignor [Ms. Ryan] and an assignee [American Nursing], and upon notice of the assignment, the obligor [N.Y. Life] must pay the proceeds due under the policy to the assignee [American Nursing]. State v. Glenn, 423 S.W.2d 770, 774 (Mo.1968); National Life & Accident Ins. Co. v. Magers, 319 S.W.2d 53, 56[3, 4] (Mo.App.1958), transferred, 329 S.W.2d 752 (Mo. banc 1959). The effect of the assignment by Ms. Ryan to American Nursing was to divest all rights to the benefits accrued to her favor under the N.Y. Life policy for the cost of the treatment by that health care provider, and to invest those same rights in American Nursing. Kroeker v. State Farm Mut. Auto. Ins. Co., 466 S.W.2d at 110. The...