Fryman v. Federal Crop Ins. Corp.
| Decision Date | 13 June 1991 |
| Docket Number | No. 90-5881,90-5881 |
| Parties | Clay FRYMAN and Bobby Kinder, Plaintiffs-Appellants, v. FEDERAL CROP INSURANCE CORPORATION, Defendant, Central Kentucky All Risk Crop Insurance Agency, Inc.; John E. Soper, III and Clay Mann, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Charles W. Rolph, Flemingsburg, Ky., Arthur J. Morburger (argued), Miami, Fla., for plaintiffs-appellants.
Gordon W. Moss (argued), Hays, Moss & Lynn, Lexington, Ky., Thomas H. Glover, Glover, Herren & Adams, Lexington, Ky., for defendants-appellees.
Before KEITH and MILBURN, Circuit Judges, and HILLMAN, Senior District Judge *.
Plaintiffs-appellants Clay Fryman and Bobby Kinder appeal from a judgment for defendant Federal Crop Insurance Corporation ("FCIC"), following a bench trial. However, the actual challenge in this appeal is to the summary judgment granted in favor of defendants-appellees Central Kentucky All Risk Crop Insurance Agency, Inc., John E. Soper, III, and Clay Mann in an earlier phase of this bifurcated proceeding. The summary judgment was granted after the district court set aside a jury verdict for plaintiffs by granting a new trial on the basis of the jury instructions. Jurisdiction is based upon 7 U.S.C. Secs. 1506(d) and 1508(c). For the reasons that follow, we affirm.
Plaintiffs in this action were, at all times relevant to this appeal, Kentucky tobacco farmers. Beginning in 1980 and continuing into 1983, plaintiffs insured their crops with the FCIC, a federal agency.
Section 13 of the insurance policy allowed either party to cancel the policy for the following crop year upon giving timely notice. Section 10 of the policy reserved to FCIC the right to make changes in the policy according to the following terms.
The corporation reserves the right to change any terms and provisions of the contract from year to year. Any changes shall be mailed to the insured or placed on file and made available for public inspection in the office for the county at least 15 days prior to the cancellation date preceding the crop year for which the changes are to become effective, and such mailing or filing shall constitute notice to the insured. Acceptance of any changes will be conclusively presumed in the absence of any notice from the insured to cancel the contract as provided in Section 13 of the policy.
The plaintiffs were insured for crop year 1983, neither party having cancelled the policy. However, early in 1982, the FCIC amended coverage for the 1983 crop year by imposing a ceiling linked to each farmer's poundage quota. The FCIC maintains that it sent notice to all policy holders in December of 1982. Plaintiffs maintain that they did not receive notification of the changes. The amendment was published in the Federal Register on March 30, 1982.
Defendant Central Kentucky All Risk Crop Insurance Agency, Inc. ("All Risk") and its representatives, defendants Soper and Mann, 1 were at all times relevant to this appeal acting as agents for FCIC. It is undisputed that in June of 1983 defendant Mann went to plaintiffs' farms in connection with annual acreage reports. According to plaintiffs, they inquired of Mann whether their crop insurance continued unchanged from prior years. Plaintiffs claim that Mann answered in the affirmative after making telephone inquiries, presumably to be sure of the correct response.
It also appears to be undisputed that the plaintiffs took no action in reliance upon the alleged conversations with Mann as plaintiffs had already planted all the tobacco they intended to grow. When plaintiffs' crops were damaged, they submitted claims. FCIC refused to pay above the ceilings imposed by the 1982 amendment, and this action followed.
Plaintiffs sought damages equal to the difference in the amount they were paid under the 1982 amendment and the amount they would have been paid without the 1982 amendment. Plaintiffs alleged breach of contract, misrepresentation, negligence, and violation of the Kentucky Fair Trade Practices Act against FCIC and defendants.
Upon a stipulation by the parties, all proceedings were submitted to a magistrate. The magistrate ordered the claims against FCIC bifurcated for a bench trial to follow completion of a jury trial against the other defendants. On January 10 and 11, 1989, the claims against All Risk, Soper, and Mann were tried before a jury.
At the close of plaintiffs' proof, defendants moved for a directed verdict on all claims. Defendants argued that since plaintiffs made their decisions concerning insurance and the size of the tobacco crop they planted before the alleged conversations with Mann, there was no detrimental reliance to substitute for consideration. Without actually explaining why there was no need for consideration or what the consideration could have been, the magistrate denied defendants' motion.
At the close of all proof the defendants renewed their motion for a directed verdict. In arguing their motion, defendants cited the case of Young v. White, 551 S.W.2d 12 (Ky.Ct.App.1977), as setting forth five requirements for proving an oral contract for insurance and argued that plaintiffs had failed to prove all the requirements. The court held that sufficient evidence had been produced to require submission of the issues to the jury and denied defendants' motion for a directed verdict.
The court then took up the matter of jury instructions. All parties requested the equivalent of "instruction 8" which required the jury to determine, first, whether plaintiffs' alleged conversation with Clay Mann occurred, and, second, whether (as required by Young v. White ) the contents of that conversation supplied (1) the purpose of the contract, (2) the type risk protected, (3) the premium rate, (4) the duration of the coverage, (5) the amount of coverage, and (6) the identity of the parties. No party submitted an instruction concerning whether or not plaintiffs had received notice of the 1982 amendment, and no party objected to the lack of such an instruction. The court's instructions to the jury incorporated instruction 8 and permitted liability only upon the oral contract theory. After instructing the jury, the court inquired as to whether the parties had additional instructions, and they answered in the negative. Thereafter, following its deliberations, the jury returned a verdict in favor of plaintiffs for $80,000.
On January 11, 1990, the court entered judgment on the jury verdict, and on January 23, 1990, defendants filed a motion for judgment notwithstanding the verdict ("JNOV") or, alternatively, for a new trial arguing, among other things, that the Mann conversation had no legal effect because of the existing contract and a lack of consideration to support an oral contract. The magistrate denied the motion, considering only the argument that the Mann conversation had no legal effect and concluding that there was sufficient evidence to support an oral contract. The magistrate refused to consider JNOV on the remaining arguments since they were not asserted in the motion for directed verdict. See Johnson v. Rogers, 621 F.2d 300, 305 (8th Cir.1980) ().
However, the magistrate granted defendants' motion for a new trial on the basis of the court's failure to give an instruction concerning whether or not plaintiffs had received notice of the 1982 amendment. The court explained that
[f]rom the beginning, the focus of this case has always seemed to be somewhat off-center. The parties in this action, both in their proof and, especially, in their motions for, and responses to, a directed verdict, argued over whether "notice" of the change was given.... For some reason, however, when it came time to submit jury instructions, both parties tendered instructions addressing the issue of whether the alleged conversation of June, 1983, gave rise to an oral contract of insurance. Neither party asked for an instruction relating to whether the plaintiffs received notice of the change in the contract for 1983, and accordingly, no instruction was given. For the reasons set forth below, the Magistrate concludes that it was plain error not to give such an instruction, and, as a result of such failure, a substantial miscarriage of justice occurred.
J.A. 22. The magistrate further explained that although on the surface there appeared to be sufficient evidence to supply the demands of instruction 8 pertaining to plaintiffs' alleged conversation with defendant Mann, the conversation was "completely immaterial to the resolution of this case based on the evidence presented by the parties at trial."
The magistrate reasoned that if plaintiffs did not receive notice, they were not bound by the amendment and could recover. Thus, the conversation was immaterial. On the other hand, if the plaintiffs did receive notice, they were bound by the terms of the contract and could not recover. The alleged oral contract could not have changed the terms of the written contract because it was not
supported by either actual consideration or some substitute therefore such as detrimental reliance.... The plaintiffs did not agree to pay a larger premium for this more expansive coverage, nor did the plaintiffs rely on the representation of the defendant, Clay Mann, as all planting and setting of the tobacco crop for 1983 had been completed by the time the June, 1983, conversation occurred.
In advance of the new trial, defendants filed a motion for summary judgment. The magistrate granted the motion reasoning that any liability of the defendants, excluding the disclosed principal, FCIC, could only be based upon an oral contract arising from plaintiffs' alleged conversation with Mann, and further that, as stated in the order granting the new trial, there was no consideration to support an oral...
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