Gardner, In re
| Decision Date | 02 March 1987 |
| Docket Number | 85-3366 and 85-3368,85-3335,Nos. 85-3234,85-3275,s. 85-3234 |
| Citation | 810 F.2d 87 |
| Parties | 16 Collier Bankr.Cas.2d 349, Bankr. L. Rep. P 71,607 In re Phillip Lee GARDNER, Debtor. Edwin H. BREYFOGLE, Trustee-Appellee, (85-3234/3335) Cross-Appellant, (85- 3275/3368) Trustee-Appellant, (85-3366) Paul Ray Marx, Elizabeth Marx, Plaintiffs-Appellees, (85-3234/3335) Cross- Appellants, (85-3275/3368) Plaintiffs-Appellants, (85-3366) v. GRANGE MUTUAL CASUALTY COMPANY, Defendant-Appellant, (85-3234/3335) Cross- Appellee, (85-3275/3368) Defendant-Appellee. (85-3366) |
| Court | U.S. Court of Appeals — Sixth Circuit |
Donald A. Powell, John L. Reyes, argued, Robert L. Tucker, Buckingham, Doolittle & Burroughs, Akron, Ohio, for Grange Mut. Cas. Co.
Stanley G. Burech, argued, Burech & Sargus, St. Clairsville, Ohio, for Marx.
Michael A. Thompson, Russ Kendig, Krugliak, Wilkins, Griffiths, & Dougherty, Co., LPA, Canton, Ohio, for Breyfogle.
Before WELLFORD and GUY, Circuit Judges; and PECK, Senior Circuit Judge.
The threshold question in this case, which raises numerous issues on appeal, is the jurisdictional question whether the district court's reversal and remand of a bankruptcy judge's decision was a final and appealable order. For the reasons stated below, we find that we do have jurisdiction to hear the appeal, and we also conclude that defendant's insurance policy did not extend coverage to the debtor under the circumstances of the accident at issue.
No party takes issue with the underlying facts giving rise to this appeal. On July 16, 1972, Phillip Lee Gardner, the debtor in bankruptcy, drove Barbara Sue Mills (Mills) to a family picnic in Wheeling, West Virginia, in an automobile owned by John R. Gardner, Phillip Gardner's father. The automobile was insured under a "family combination automobile policy" issued by defendant Grange Mutual Casualty Company (Grange). Phillip Gardner became ill at the picnic and Mills drove the automobile back to Ohio with Gardner riding as a passenger. Mills was 20 years old at that time. In Belmont County, Ohio, the Gardner automobile collided with the automobile of the plaintiff, Paul Marx, and his wife, Elizabeth Marx, also a plaintiff, sustained personal injuries in that collision. This complicated and protracted litigation is the result of the Marxes' effort to recover damages after that accident.
On February 1, 1974, the Marxes filed a complaint for money damages against Phillip Lee Gardner and Mills. The Marxes and Mills reached a settlement, whereby Mills' insurer paid $12,500.00 to the Marxes in exchange for a covenant not to sue. The case proceeded to trial against Gardner 1 on an agency theory.
Hudson Hillyer, Gardner's attorney, recommended to Grange that it defend him. Grange notified Hillyer on at least six occasions that it had no duty to defend and that no insurance coverage existed on behalf of Gardner. Grange determined that no coverage existed because of the policy's language in Endorsement A-7B, which stated: "such insurance as is afforded by the policy shall not apply while the owned automobile is being operated or used by ... any person under 21 years of age ... other than the named insured or a member of the named insured's immediate family." On May 1, 1978, the Marxes offered to settle their claim against Gardner for $12,500.00, well within the limits of the insurance policy issued by defendant. Because prior communication with Grange had been fruitless, Hillyer never communicated the settlement offer to Grange.
On May 5, 1978, the case was tried and the jury returned a verdict against Gardner and in favor of Elizabeth Marx for $55,000.00 and in favor of Paul Marx for $35,000.00. On May 9, 1978, the Common Pleas Court of Belmont County entered judgment on the verdict and taxed the costs against Gardner.
On July 25, 1978, the Marxes filed a supplemental complaint against Gardner and Grange seeking the amount of the judgment entered on May 9, 1978, interest, and costs. Gardner filed a cross-claim against Grange alleging breach of contract and bad faith, seeking damages in the amount of the judgment rendered against him and his attorney's fees. Grange answered the complaint and cross-claim asserting the affirmative defenses of failure to state a claim upon which relief can be granted and the absence of liability under the insurance policy.
Grange and Gardner agreed to a settlement of all claims on January 6, 1981. Gardner contends that at that time he believed he was settling his claim only, and not the Marxes' claim against Grange. Gardner executed a release in favor of Grange in exchange for $10,000.00. Gardner paid $7,000.00 of the amount he received in the settlement to his attorney for the services rendered in representation in the action in common pleas court, and used the remaining $3,000.00 to pay existing bills. Gardner admits that at the time the release was signed, he could not pay the Marxes' judgment. Gardner further contends that at the time of the settlement, Grange's attorney knew Gardner was insolvent and would not pay the outstanding judgment owed to the Marxes, then approximately $90,000. The Marxes attempted to pursue the claim against Grange in the Belmont County Court of Common Pleas and filed a motion for summary judgment. The court denied the motion on May 30, 1980. On March 13, 1981, the Marxes filed a petition requesting an involuntary order for relief in the United States Bankruptcy Court against Gardner. Edwin H. Breyfogle was appointed trustee.
On the trustee's application, the bankruptcy court removed the action between the Marxes and Grange from the Belmont County Court of Common Pleas to the bankruptcy court on July 22, 1981. The trustee then filed an action in the bankruptcy court against Grange and Gardner. The bankruptcy court consolidated the action removed from common pleas court with the action filed by the trustee for a trial on the merits.
The trustee's complaint in bankruptcy alleged that Grange breached the insurance contract, wilfully and in bad faith, by refusing to defend Gardner and by failing to provide coverage. The complaint also alleged that the release executed by Gardner and Grange was fraudulent under both § 548 of the Bankruptcy Code and Ohio Revised Code § 1336 in that Gardner was insolvent or became insolvent because of the release and less than equivalent value was exchanged. The complaint also claimed that Gardner executed the release with intent to hinder, delay or defraud the Marxes, but this count was dismissed on the parties' stipulation. Count six of the complaint, alleging that Grange induced Gardner to sign the release by fraudulently promising to settle with the Marxes, was dismissed by the bankruptcy court on summary judgment prior to trial. Finally, the Marxes alleged that the action removed from the Belmont County Common Pleas Court was a creditor's bill under Ohio Revised Code section 2333.01.
In September of 1982 the bankruptcy court ruled in favor of Grange and against the trustee and the Marxes. Specifically, the bankruptcy court decided that the insurance policy did not cover Gardner in this accident because the exclusion in Endorsement A7-B applied. The bankruptcy court further found that the release Gardner executed in favor of Grange in January 1981 was not fraudulent. Finally, the court found that the Marxes failed properly to plead or to prove a creditor's bill under Ohio law.
Breyfogle, the trustee, and the Marxes appealed this judgment to the district court. Included in the appeal was the Ohio state court decision that overruled the Marxes' motion for partial summary judgment, and the bankruptcy court's decision in favor of Grange.
To complete this saga, the district court reversed the bankruptcy court, finding that Grange's insurance policy with Gardner's father extended liability coverage to Gardner. The court further found, applying Ohio law, that Grange would have been liable to Gardner as a matter of law for the attorney's fees incurred in his defense and for the $90,000 judgment the Marxes obtained against him had Gardner pursued his cross-claim against Grange. The district court, however, remanded the case to the bankruptcy court to determine whether the release signed by Gardner and Grange was fraudulent as to the Marxes and the trustee. On remand, the bankruptcy court was to determine whether Gardner received a fair and equivalent value in exchange for his release to Grange, whether Gardner intended to defraud his creditors when he executed the release, and whether he executed the release with a belief or knowledge that he would be unable to pay his debts as they became due.
Following the district court's decision, Breyfogle and the Marxes moved the district court pursuant to Federal Rules of Civil Procedure 52(b) and 59(e) to make additional findings concerning issues raised on appeal from the bankruptcy court's decision but allegedly not decided by the district court. Plaintiffs specifically requested the court to decide whether the Common Pleas Court of Belmont County erred in overruling the Marxes' motion for partial summary judgment. The Marxes' motion and the Belmont County court's ruling predated the release, which was not executed until January 6, 1981. Breyfogle and the Marxes further requested the district court to decide if the release was valid under state contract law. Finally, they requested the district court to determine if Grange's actions made Grange liable not only for Gardner's judgment and attorney's fees but also for punitive damages and the trustee's attorney's fees.
On March 15, 1985, the day following the filing of the Rule 52(b) and 59(e) motions, Grange filed a notice of appeal from the district court's judgment of March 4, 1985 to this court. Breyfogle and the Marxes filed a cross-appeal and a motion to dismiss for lack of jurisdiction. Grange...
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