Boswell v. American Ins. Co., 17440

• Decision Date: 22 June 1992
• Docket Number: No. 17440,17440
• Citation: 835 S.W.2d 454
• Parties: John J. BOSWELL and Thomas J. O'Neil, Statutory Trustees of Hazelgreen Trading Company, Plaintiffs-Appellants, v. The AMERICAN INSURANCE COMPANY, West American Insurance Company, Michael P. McClanahan, Bobbie McClanahan and Farmer-Foster Insurance Agency, Inc., Defendants-Respondents.
• Court: Missouri Court of Appeals

Page 454

835 S.W.2d 454

John J. BOSWELL and Thomas J. O'Neil, Statutory Trustees of Hazelgreen Trading Company, Plaintiffs-Appellants, v. The AMERICAN INSURANCE COMPANY, West American Insurance Company, Michael P. McClanahan, Bobbie McClanahan and Farmer-Foster Insurance Agency Inc., Defendants-Respondents.

No. 17440.

Missouri Court of Appeals,

Southern District,

Division Two.

June 22, 1992.

Motion for Rehearing or to

Transfer Denied July 13, 1992.

Application to Transfer Denied Sept. 22, 1992.

David F. Sullivan, Schmidt, Kirby & Sullivan, Springfield, for plaintiffs-appellants.

Michael J. Patton, C. Bradley Tuck, Turner, Reid, Duncan, Loomer & Patton, Springfield, for defendant-respondent Farmer-Foster.

David W. Hall, Jr., Bussell, O'Neal & Hall, Springfield, for defendant-respondent American Ins. Co.

FLANIGAN, Chief Judge.

Plaintiffs in this action are John J. Boswell and Thomas J. O'Neil, statutory trustees ¹ of Hazelgreen Trading Company, a former Missouri corporation ("Hazelgreen"). Defendants are The American Insurance Company ("American"), West American Insurance Company ("West American"), Michael P. McClanahan and Bobbie McClanahan, and Farmer-Foster Insurance Agency, Inc., ("Farmer-Foster").

The second amended petition contained four counts. In Count I, plaintiffs sought reformation of a fire insurance policy issued by American ("the policy"). Count I was directed against American and the McClanahans and, initially, Farmer-Foster. The trial court sustained Farmer-Foster's motion for summary judgment on Count I. On January 10, 1990, the trial court (Judge John E. Parrish), after holding a separate trial on Count I, made findings of fact and conclusions of law, held that plaintiffs were not entitled to reformation of the policy, and denied plaintiffs relief on Count I.

Count II was directed against defendant West American. A settlement was reached by plaintiffs and West American, and plaintiffs dismissed Count II with prejudice.

Count III was directed against American and sought recovery under the policy. On February 8, 1991, on the tenth day of a jury trial on Count III, the trial court (Judge Mary Dickerson) entered an order sustaining American's motion to dismiss Count III.

Count IV of the petition was directed against Farmer-Foster and alleged that Farmer-Foster knew or should have known that Hazelgreen was to be named loss payee under the policy, that Farmer-Foster neglected to make sure that the policy was issued in proper form so as to protect Hazelgreen as a loss payee, that "said failure to make sure the policy was issued in proper form was negligent," and that Hazelgreen was damaged by reason of the negligence. On July 11, 1990, the trial court (Judge Mary Dickerson) sustained Farmer-Foster's motion for summary judgment with respect to Count IV and entered judgment on Count IV in favor of Farmer-Foster.

Plaintiffs appeal and challenge only the rulings of the trial court with respect to Count III and Count IV. Although plaintiffs have not challenged that portion of the judgment which disposed of Count I the content and disposition of Count I affect plaintiffs' contentions on appeal with respect to Count III and Count IV. The three counts will be discussed separately.

COUNT I

Count I pleaded, in addition to its formal portions concerning such matters as venue and land descriptions, the allegations set forth in the following eight paragraphs.

Plaintiffs are the last named officers and directors of Hazelgreen, a former Missouri corporation, whose corporate charter was forfeited on November 1, 1983. Pursuant to § 351.525, plaintiffs are the statutory trustees of Hazelgreen and are authorized to bring this action. Hazelgreen owned land and improvements in Laclede County. On June 1, 1981, Hazelgreen, as lessor, and the McClanahans, as lessees, entered into a lease agreement for the premises and improvements, and possession was transferred to the McClanahans. In connection with the lease, Hazelgreen also sold to the McClanahans all inventory "previously owned by [Hazelgreen], d/b/a Factory Store." Hazelgreen financed the sale of the inventory and took a note from the McClanahans in the principal amount of $34,000. The note was secured by an agreement in which the McClanahans conveyed a security interest in the inventory to Hazelgreen.

From and after June 1, 1981, the McClanahans owned and operated the business known as Cedar Hill Trading Post, using the inventory and the land. Neither Hazelgreen nor any of its trustees at any time was involved, either directly or indirectly, as an owner or operator of the business known as Cedar Hill Trading Post. Under the agreements between Hazelgreen and the McClanahans, the McClanahans were obligated to purchase and maintain fire and extended coverage insurance to protect the interest of Hazelgreen as to the land, improvements and inventory.

On December 1, 1983, in consideration of a premium, American, through Farmer-Foster, issued a policy of insurance which extended fire loss coverage on the building and contents. A copy of the policy is attached and marked Exhibit A and incorporated.

The General Declarations listed the named insured as follows:

"Named Insured and Mailing Address

MIKE McCLANAHAN & JOHN BOSWELL, ATIMA

DBA CEDAR HILL TRADING POST.

RT. 2, BOX 404

RICHLAND MO 65556

The named Insured is a(n) PARTNERSHIP

Business or Operations of the Named Insured: GIFT SHOP."

On February 18, 1984, the building and contents were totally destroyed by fire. The policy was continuously in force from date of issuance to date of loss. By reason of the fire, Hazelgreen has been damaged in the sum of $57,822 for the loss of the building and improvements and as a secured party has been damaged in the sum of $30,291.47, plus interest to date of $5,704.90 on the indebtedness secured by the contents.

The policy was incorrectly and mistakenly issued in the following respects: Mike McClanahan and John Boswell were shown as the named insureds, d/b/a Cedar Hill Trading Post, when, in fact, John Boswell had no ownership interest in the business known as Cedar Hill Trading Post. Hazelgreen was not shown as a loss payee.

The mistakes were mutual. All parties involved in connection with the issuance of the policy intended to insure Mike McClanahan and Bobbie McClanahan, d/b/a Cedar Hill Trading Post, as the named insured, and protect the interest of Hazelgreen as a loss payee as owner of the real estate and as a secured party of the inventory. The policy did not accomplish the objective intended by the parties and therefore should be reformed by the court so as to accomplish the intended objective of the parties. The plaintiffs have no adequate remedy at law.

American has refused to pay plaintiffs the sums set forth above, or any part thereof, despite demand. American's refusal to pay the loss sustained by Hazelgreen is vexatious, without reasonable cause or excuse, and in violation of the policy. Hazelgreen is entitled to damages for vexatious delay, and reasonable attorney's fees, pursuant to §§ 375.296 and 375.420.

The prayer of Count I was that the court reform the policy "so as to show the named insured to be Mike McClanahan and Bobbie McClanahan, d/b/a Cedar Hill Trading Post, and to show Hazelgreen as the loss payee, under the terms of the policy." Plaintiffs also prayed for judgment, after reformation, from American in the sum of $108,710.81, plus interest, vexatious penalties, and reasonable attorney's fees.

On January 10, 1990, after a separate trial had been held on Count I, Judge Parrish entered an order denying plaintiffs reformation and other relief requested by Count I. Among the findings of fact contained in that ruling were the following:

On June 1, 1983, West American issued a policy which designated Mike McClanahan, d/b/a Cedar Hill Trading Post, as the named insured and Hazelgreen as mortgagee. In November 1983, defendant Mike McClanahan contacted Bob Garner, an independent insurance agent, about obtaining other insurance coverage. Garner contacted Ed Rowe of Farmer-Foster. Farmer-Foster was a general agent for American. Mike McClanahan dealt only with Bob Garner and did not deal directly with Farmer-Foster or any employee of Farmer-Foster. Garner dealt with Ed Rowe, an employee of Farmer-Foster.

At the request of Garner, Ed Rowe, on behalf of Farmer-Foster, gave a premium quotation to Garner for a policy of insurance which would be available from American. Garner provided Mike McClanahan with the information he had received from Ed Rowe with respect to the premium quotation for the requested insurance coverage. McClanahan advised Bob Garner that McClanahan would first have to check with John Boswell about the possibility of obtaining different insurance coverage. Thereafter, McClanahan advised Garner that McClanahan wished to obtain the insurance coverage from American.

McClanahan told Garner that John Boswell and McClanahan should be the named insureds. Garner thereafter contacted Ed Rowe of Farmer-Foster and told Rowe that John Boswell and Mike McClanahan were to be the named insureds on the American policy.

On November 30, 1983, Ed Rowe, on behalf of Farmer-Foster, issued a policy binder naming as insureds John Boswell and Mike McClanahan in accordance with the request that had been received from Bob Garner. American issued its policy, effective December 1, 1983, which designated its insureds as Mike McClanahan and John Boswell.

The conclusions of law contained in the ruling included the following:

The policy of insurance issued by American was in accordance with the request communicated by Mike McClanahan and Bob Garner to Farmer-Foster. The policy of insurance, as issued, embodied the terms for insurance coverage that were negotiated between Bob Garner and Farmer-Foster. "However, Farmer-Foster had been provided with incorrect information about the ownership of the business premises." Plaintiffs are not entitled to...