Bartlett v. Allstate Ins. Co.
| Decision Date | 10 December 1996 |
| Docket Number | No. 95-543,95-543 |
| Parties | Sherman BARTLETT, Plaintiff and Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant and Respondent. |
| Court | Montana Supreme Court |
Steven S. Carey, Carey, Meismer & McKeon, Missoula, for Defendant and Respondent.
Sherman Bartlett appeals from opinions and orders issued by the Fourth Judicial District Court, Missoula County, granting summary judgment in favor of Allstate Insurance Company. We affirm in part and reverse in part.
We address the following issues on appeal:
1. Did the District Court err in determining that Bartlett did not have an insurable interest in the property at the time of loss?
2. Did the District Court err in determining that Bartlett did not have colorable claims for unfair trade practices or for fraud, constructive fraud, or punitive damages?
3. Did the District Court err in managing discovery or in awarding costs?
On appeal, the appellant also raised the issue of whether the District Court erred in ruling that material misrepresentations on the application for insurance precluded recovery. However, we affirm the District Court's grant of summary judgment to Allstate on the basis of our holding in Issue 1, and therefore determine it is not necessary to discuss this issue.
In November 1990, Bartlett entered into a buy-sell agreement with the Montana Bank of Mineral County to purchase a residence and one acre of land in Missoula for $31,000. The Bank agreed to close the transaction on November 28, 1990, and instructed Bartlett that he must obtain an insurance binder on the property before closing.
On November 27, 1990, Bartlett met with an agent from Allstate Insurance Company, Surilda Hanks, to obtain the insurance binder. Hanks prepared an application for a landlord's package policy in which Allstate agreed to insure the property, naming Bartlett as the insured and the Bank as loss payee under the policy as first mortgagee. Hanks completed the application in Bartlett's presence based upon information Bartlett provided to her. The completed application indicated that the purchase price for the property was $50,000 and that the property had not been vacant for more than thirty days. Allstate insured the dwelling for $68,000 and Bartlett's personal property for $3,400. Bartlett signed the application and the insurance was to become effective on November 28, 1990.
On November 28, 1990, Bartlett and the Bank president met to transfer the deed and trust indenture. The Bank had discovered a prior lien against Bartlett for a $10,000 child support judgment and was concerned that this lien would attach to the property and therefore declined to proceed with the closing. Bartlett notified Hanks the same day that the transaction had not closed. As a result, Hanks did not submit the binder to Allstate and Allstate never processed the policy. Bartlett never paid a premium for insurance coverage.
On December 23, 1990, a fire completely destroyed the home Bartlett intended to purchase. In January 1991, Bartlett made a demand upon Allstate requesting the full policy limits of $71,400 plus interest. Allstate denied Bartlett's demand, stating that the binder was intended to become effective at the time of closing, which never occurred. Allstate claimed that Bartlett had cancelled the policy prior to the fire when he called Hanks to inform her that the closing had not taken place, and that, in any event, the Bank had assumed the risk of loss. In October 1992, the Bank assigned any interest it may have had in the insurance policy to Bartlett.
On November 24, 1992, Bartlett filed a complaint and demand for jury trial against Allstate seeking to recover for wrongful denial of the insurance proceeds. In April 1994, Bartlett filed an amended complaint alleging that, in addition to the original claims, Allstate violated § 33-18-201, MCA, which is Montana's prohibition against unfair trade practices. Each party filed motions for summary judgment, and on August 31, 1994, the District Court issued an opinion and order granting summary judgment in Allstate's favor and dismissed all of Bartlett's claims. The District Court determined that the policy was void ab initio because of material misrepresentations, that the buy-sell agreement did not provide Bartlett with an insurable interest, and that the Bank's assignment of its interest in the policy to Bartlett failed. The court dismissed Bartlett's claims, including those for fraud, constructive fraud, and unfair trade practices, and determined that Bartlett had no claim for punitive damages.
On the same day the court issued its summary judgment ruling, it issued an order in response to motions filed by each party. Allstate had moved the court for a protective order on discovery related to the unfair trade practices claim, alleging that Bartlett was pursuing discovery beyond the limits allowed by the Montana Rules of Civil Procedure. Bartlett had also filed a motion to compel the production of a statement given by Hanks after the insurance binder had been signed. The District Court granted Allstate's motion Bartlett subsequently filed a motion to amend or alter the District Court's summary judgment order. On November 4, 1994, the court issued an opinion and order reaffirming its decision on summary judgment but vacating its summary judgment ruling on the unfair trade practices claim. The court continued its protective order concerning discovery on that claim. On December 22, 1994, the District Court issued an opinion and order awarding costs to Allstate in the amount of $1,414, and on July 14, 1995, the court granted Allstate's motion for summary judgment on the unfair trade practices claim. This appeal followed.
and stayed further discovery, and denied Bartlett's motion. The court also awarded Allstate certain costs for depositions which had been taken.
Our standard of review in appeals from summary judgment is de novo. Motarie v. Northern Mont. Joint Refuse Dist. (1995), 274 Mont. 239, 242, 907 P.2d 154, 156; Mead v. M.S.B., Inc. (1994), 264 Mont. 465, 470, 872 P.2d 782, 785. When we review a district court's grant of summary judgment, we apply the same evaluation as the district court based on Rule 56, M.R.Civ.P. Bruner v. Yellowstone County (1995), 272 Mont. 261, 264, 900 P.2d 901, 903. In Bruner we set forth our inquiry:
The movant must demonstrate that no genuine issues of material fact exist. Once this has been accomplished, the burden then shifts to the non-moving party to prove by more than mere denial and speculation that a genuine issue does not exist. Having determined that genuine issues of material fact do not exist, the court must then determine whether the moving party is entitled to judgment as a matter of law. We review the legal determinations made by the district court as to whether the court erred.
Did the District Court err in determining that Bartlett did not have an insurable interest in the property at the time of loss?
Bartlett argues that he had an insurable interest in the property at the time of the loss. He claims that the buy-sell agreement between him and the Bank was legally binding on both parties. The agreement obligated the Bank to transfer title to the property to Bartlett and in turn Bartlett was obligated to purchase the property. Bartlett argues that at the time of the loss the buy-sell agreement was still legally enforceable since neither party had terminated it.
Bartlett also contends that he is entitled to the Bank's interest under the binder, relying on the fact that the Bank assigned its interest in the binder to him in October 1992. Bartlett argues that even if his interest was voided due to material misrepresentations on the insurance application, a mortgagee's interest remains protected. He claims he is entitled to receive from Allstate the Bank's monetary interest in the policy.
Section 33-15-205, MCA, provides that no contract of insurance shall be enforceable except for the benefit of persons having an insurable interest in the property at the time of the loss. Subsection (2) defines "insurable interest" as any actual, lawful, and substantial economic interest in the safety or preservation of the property insured. A purchaser of real estate may have an insurable interest in property to which he or she does not hold title if an enforceable executory contract has been executed which gives the purchaser the right to possess the property. See Musselman v. Mountain West Farm Bureau Mut. Ins. Co. (1992), 251 Mont. 262, 824 P.2d 271.
In the present case, the buy-sell agreement executed by the parties stated that Bartlett would execute a promissory note in favor of the Bank and that the property would be secured with a first position trust indenture. The terms of the buy-sell agreement clearly made the sale contingent upon the Bank holding a first position trust indenture. When the Bank discovered a $10,000 unsatisfied child support judgment against Bartlett, it could not be assured of a first position security interest. Bartlett did not eliminate the judgment lien and the condition precedent to the buy-sell agreement becoming effective was not met. The agreement was therefore terminated and the Bank was the unconditional owner of the property.
Moreover, our examination of the record substantiates the fact that Bartlett did not believe he owned the property at the time of the loss. Hanks testified that Bartlett called her and told her that the deal did not go through and that he did not need the insurance. Hanks testified that following the fire Bartlett called her to ask about the insurance. She said she had done nothing "because you told me not to." Bartlett responded by stating "[w]ell, that's a good thing because the...
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