General Motors Acceptance Corp. v. The Windsor Group Inc.

• Decision Date: 07 September 1999
• Citation: 2 S.W.3d 836
• Parties: (Mo.App. E.D. 1999) . General Motors Acceptance Corporation, Appellant, v. The Windsor Group, Inc., and Windsor Insurance Company, Respondents. Case Number: 74939 Missouri Court of Appeals Eastern District Handdown Date: 0
• Court: Missouri Court of Appeals

2 S.W.3d 836 (Mo.App. E.D. 1999)

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.

General Motors Acceptance Corporation, Appellant, v. The Windsor Group, Inc., and Windsor Insurance Company, Respondents.

Case Number: 74939

Missouri Court of Appeals Eastern District

Handdown Date: 09/07/99

Appeal From: Circuit Court of St. Louis County, Hon. Patrick Clifford

Counsel for Appellant: Nelson L. Mitten

Counsel for Respondent: Kenneth A. Slavens

Opinion Summary: General Motors Acceptance Corporation (GMAC) appeals from the trial court's judgment granting The Windsor Group, Inc.'s and Windsor Insurance Co.'s (collectively Windsor) motion to dismiss GMAC's declaratory judgment action, or in the alternative, motion for judgment on the pleadings. GMAC argues that the trial court erred in granting Windsor's motion to dismiss because its petition alleged facts sufficient to warrant a declaration of its rights under the insurance policy. Windsor asserts that GMAC does not have standing to bring the declaratory judgment action and that GMAC's petition was deficient as a matter of law because it failed to demonstrate a justiciable controversy between the parties or that GMAC had a legally protectable interest at stake.

REVERSED AND REMANDED.

Division Three holds: GMAC has no standing to seed a declaration of its rights to proceeds under the relevant policy as a party to the policy, but GMAC has standing to seek a declaration of its rights under the insurance policy as a third party beneficiary. Furthermore, a justiciable controvery exists. GMAC's petition alleged sufficient facts from which it has present legal rights against Windsor, which may entitle GMAC to relief. Accordingly, the trial court erred in granting Windsor's alternative motions to dismiss and for judgment on the pleadings.

Opinion Author: Clifford H. Ahrens, Judge

Opinion Vote: REVERSED AND REMANDED. Teitelman, P.J., and Mooney, J., concur.

Opinion:

The plaintiff, General Motors Acceptance Corporation ("GMAC"), appeals from the trial court's judgment granting the defendants', The Windsor Group, Inc. and Windsor Insurance Co. (collectively "Windsor"), motion to dismiss GMAC's declaratory judgment action, or in the alternative, their motion for judgment on the pleadings. GMAC contends that the trial court's judgment was in error because its petition alleged facts sufficient to warrant a declaration of its rights under the relevant insurance policy. Windsor counters that GMAC lacks standing to bring the declaratory judgment action and that its petition was deficient as a matter of law because it failed to demonstrate a justiciable controversy between the parties or that GMAC has a legally protectable interest at stake. We reverse and remand.

Viewed in the light most favorable to the plaintiff, the petition alleges that in July of 1996, Roger Roderick ("Roderick") purchased a 1996 Chevrolet Corvette.¹ GMAC and Roderick entered into an agreement under which GMAC would provide financing for the automobile. The financing plan required Roderick to purchase a property damage insurance policy for the automobile and name GMAC as the loss payee under the policy.

On or about August 21, 1996, Roderick obtained property damage insurance from Windsor. GMAC was named as the loss payee. The policy became effective August 21, 1996. On August 25, 1996, the automobile was involved in an accident and sustained serious damage. Roderick made a claim against Windsor under the policy. Windsor denied coverage on the grounds that the policy was null and void as a result of fraudulent misrepresentations by Roderick in his application for insurance.² On or about February 12, 1997, GMAC also made demand on Windsor for monies due and owing GMAC as the loss payee. Windsor again refused to pay.

GMAC brought a declaratory judgment action against Windsor and Roderick for a determination of its rights to proceeds under the policies as loss payee.³ Windsor filed a motion to dismiss for failure to state a claim on grounds that GMAC lacked standing to bring the action. Alternatively, Windsor filed a motion for judgment on the pleadings claiming that, as a matter of law, GMAC is not entitled to recover under the policy because such policy was void ab initio as a result of the insured's fraudulent conduct.⁴ The trial court entered judgment in favor of Windsor. GMAC filed this appeal.

We first review the trial court's dismissal of GMAC's petition for lack of standing. Standing to bring a declaratory judgment action requires the plaintiff to have a legally protectable interest at stake. Battlefield Fire Protection Dist. v. City of Springfield, 941 S.W.2d 491, 492 (Mo. banc 1997). A legally protectable interest means "a pecuniary or personal interest directly in issue or jeopardy which is subject to some consequential relief, either immediate or prospective." American Economy Ins. Co. v. Ledbetter, 903 S.W.2d 272, 274 (Mo. App. 1995) (citation omitted). In contract actions, a party has a legally protectable interest at stake if it has a right to enforce the contract as a party thereto or as a third party beneficiary. Farmers Ins. Co., Inc. v. Miller, 926 S.W.2d 104, 107 (Mo. App. 1996).⁵ Windsor argues that GMAC cannot enforce the policy as a party thereto or as a third party beneficiary. We agree with the former contention but disagree with the latter.

The loss payable (or mortgage) clause in the insurance policy at issue is commonly referred to as an open clause.⁶ Under an open clause, the loss payee's rights, as against the insured, are dependent upon the acts or omissions of the insured. Central Bank of Lake of the Ozarks v. First Marine Ins. Co., 975 S.W.2d 222, 226 (Mo. App. 1998). In other words, the loss payee's rights will be defeated by a breach of the terms of the policy by the insured prior to the loss. If the policy is rendered void as to the insured, it is void as to the loss payee as well. Id.

This is in contrast to a union or standard loss payable clause. A union clause differs from an open clause in that it operates as an independent contract of insurance between the loss payee and the insurer. The effect of this independent contract is to ensure that, in the event of loss, the policy will be paid to the loss payee notwithstanding the fraudulent acts or omissions of the insured. Id. Conversely, there is no privity of contract between the loss payee and the insurer under an open clause. The loss payee is not a party to the policy but is merely an appointee to receive the proceeds in the event of loss. Id. Therefore, GMAC has no standing to seek a declaration of its rights to proceeds under the relevant policy as a party thereto.

On the other hand, a third party beneficiary is one who is not privy to a contract or its consideration but who may nonetheless maintain a cause of action for breach of contract. Andres v. Albano, 853 S.W.2d 936, 942 (Mo. banc 1993). A third party beneficiary can sue to enforce a contract if its terms clearly express an intent to benefit that party; mere incidental beneficiaries cannot enforce a contract. Peters v. Employers Mutual Cas. Co., 853 S.W.2d 300, 301 (Mo. banc 1993). As loss payee under the relevant insurance policy, GMAC was designated to receive the proceeds in the event of damage to the insured vehicle. Accordingly, we find a clearly expressed intent to benefit GMAC under the policy. The right to have the policy proceeds paid to the secured party as loss payee "as its interest may appear" constitutes an interest which entitles the secured party to...