Heckadon v. Universal Underwriters Ins. Co.
| Decision Date | 04 June 2019 |
| Docket Number | WD 81181, WD 81251, WD 81259, WD 81290, WD 81297 |
| Parties | Diana Lynn HECKADON, Personal Representative of the Estate of David Heckadon, Deceased, and Diana Lynn Heckadon, Appellant-Respondents, v. UNIVERSAL UNDERWRITERS INS. CO., et al.; Respondent-Appellants, Chad Franklin ; Chad Franklin National Auto Sales North, LLC ; and CFS Enterprises, Inc., Respondent-Appellants. |
| Court | Missouri Court of Appeals |
Douglass Noland, Liberty, MO, Counsel for Appellant-Respondents.
Kate Noland, Liberty, MO, Co-Counsel for Appellant-Respondents.
John Schultz, Kansas City, MO, Counsel for Respondent-Appellants.
Michael Shunk, Kansas City, MO, Co-Counsel for Respondent-Appellants Chad Franklin; CFS Enterprise; and Chad Franklin National Auto Sales North.
Brian McGovern, Town and Country, MO, Counsel for Respondent-Appellants.
Andrew Lammert, Town and Country, MO, Co-Counsel for Respondent-Appellant.
Timothy Ahrenhoesterbaeumer, Chesterfield, MO, Co-Counsel for Respondent-Appellant Universal Underwriters and Zurich American Insurance Co.
Before Division One: Lisa White Hardwick, P. J., Edward R. Ardini, and Thomas N. Chapman, JJ.
This appeal and cross-appeal are taken from a judgment in a case wherein David and Diana Heckadon ("Heckadons") sought to recover against Universal Underwriters Insurance Company ("Universal")1 and Chad Franklin ("Chad"),2 CFS Enterprises ("CFS"), and Chad Franklin National Auto Sales North ("NAS") (collectively "Franklin"), on a variety of theories alleging wrongdoing in failing to pay an earlier judgment the Heckadons had secured against Chad and CFS. The earlier judgment was secured after the Heckadons purchased a vehicle from Chad and CFS, pursuant to their "Drive for Life" program, then filed a lawsuit alleging fraudulent misrepresentation and violation of the Missouri Merchandising Practice Act (MMPA), section 407.010, et seq. , RSMo. (hereinafter "Original MMPA Action"). The Original MMPA Action resulted in the Heckadons receiving a judgment totaling $ 616,534.87.3 Universal was separately sued by Chad, NAS and Tiffany Franklin ("Tiffany") after Universal denied coverage of the Heckadons' Original MMPA Action, and settled that suit for $ 900,000, none of which was paid to the Heckadons.
In 2012 the Heckadons brought the instant action against Universal, Chad, CFS, NAS, and Tiffany.4 The judgment from which this appeal and cross-appeal are taken found in favor of the Heckadons and against Universal and Franklin on some, but not all of the Heckadons' claims. Because both Universal and Franklin cross appeal we will refrain from referring to the parties as Appellant and Respondent and will instead (when referring to them in their capacity as litigants) use the terms from the trial court, i.e., Plaintiffs and Defendants. Given the number of issues in this appeal, we begin by summarizing the conclusions reached with respect to each issue.
The Heckadons asserted claims for equitable garnishment and declaratory judgment against Universal, seeking to determine Universal’s obligations to indemnify the Original MMPA Action judgment. After a bench trial, the trial court determined that coverage applied and entered judgment against Universal in the sum of $ 647,421.39 (the amount of the Original MMPA Action judgment). In Points 1, 2, and 3 of its cross appeal, Universal argues that the court misapplied the law in construing the insurance policy and finding coverage. We find that Franklin’s conduct which was the basis for the Original MMPA Action judgment was not a covered occurrence under the Universal policy. Point 2 of Universal’s cross appeal is granted. The equitable garnishment judgment entered against Universal is reversed.5
The Heckadons made additional claims contending that the settlement among Universal, Franklin, and Tiffany resulted in a distribution of settlement proceeds that was in fraud of their rights. The trial court granted Universal’s motion for summary judgment, finding that it was not liable for the Heckadons' claims relating to its distribution of the bad faith settlement proceeds. In Points 3, 4, and 5 of their appeal, the Heckadons claim that the trial court erred in granting summary judgment on these claims. We affirm the Summary Judgment in favor of Universal.
Due to discovery violations by Franklin, the trial court sanctioned Franklin by striking its pleadings and entering an interlocutory default judgment finding Franklin liable for its distribution of the bad faith settlement proceeds. A jury trial was conducted to determine the damages to be assessed on the fraudulent transfer and MMPA claims against Franklin. The jury awarded the Heckadons $ 647,334 in actual damages on the fraudulent transfer claims against Franklin, and punitive damages of $ 500,000 against Chad, $ 500,000 punitive damages against NAS, and $ 500,000 punitive damages against CFS.6 Franklin filed a post-trial Motion to Amend the Judgment, asserting that the amount paid to its attorney in the underlying bad faith claim was subject to a valid lien and not eligible for consideration as potential damages related to the fraudulent transfer claim. Finding that it erred in holding that § 484.130 did not establish a valid attorney fee lien, the trial court sustained the motion and reduced the award of actual damages against Franklin by the amount paid to Mayer, resulting in an award of $ 266,370.41.
In Point 1 of their appeal, the Heckadons maintain that the trial court did not have the authority to amend the judgment more than 30 days after the judgment was entered. In Point 2 they contend that this reduction (by the amount of the attorney fee lien) improperly substituted the court’s verdict for the jury’s verdict in the assessment of actual damages. We find that the court had the authority to properly amend the judgment more than 30 days after it was entered, but that its amendment reducing the actual damages by the amount of the attorney’s fee was improper. Point 1 of the Heckadons' appeal is denied. Point 2 of the Heckadons' appeal is granted in part.
Franklin cross appeals, asserting (in Point 1) that the trial court erred in striking its pleadings and entering default judgment on the issue of liability; asserting (in Point 2) that the trial court erred in submitting a modified instruction which failed to require the jury to make the findings (of outrageous conduct or reckless disregard) necessary to impose punitive damages; asserting instructional error (in Point 3) regarding the verdict form; and asserting (in Point 4) that the trial court erred in refusing to allow its attorney to testify regarding the reasons for allocation and distribution of the bad faith settlement proceeds. We find that the trial court did not err in striking Franklin’s pleadings, and, therefore, deny Point 1 of Franklin’s cross appeal. We find that the trial court erred in excluding testimony explaining the bad faith settlement, and, therefore, grant point 4 of Franklin’s cross appeal. Since the effect of the trial court’s evidentiary errors materially affected the merits and outcome of the proceeding, the judgment for actual and punitive damages against Franklin is reversed and remanded for proceedings consistent with this opinion. Given our disposition of Point 4, we find it unnecessary to address the claims of instructional error raised in Points 2 and 3 of Franklin’s cross appeal.
In September 2007, the Heckadons purchased a car from Chad and CFS under the "Drive for Life" promotion.7 To participate in this promotion the Heckadons signed documents obligating them to a high interest loan to purchase the car, with Franklin agreeing to send them sufficient funds on a monthly basis to reduce their effective payment to only $ 49 a month. Unbeknownst to them at the time, the amount bundled into the loan included a charge for a $ 499.95 membership fee for participation in "Drive for Life," gap insurance, and an extended warranty for a car they were (under the terms of the promotion) to own for only one year. In 2008 the Heckadons traded in their first vehicle and selected a second. They were again charged a $ 499.95 membership fee for participation in "Drive for Life," a separate charge for gap insurance, and a separate charge for another extended warranty fee. While the sticker price of the vehicle was $ 17,495, the price they were charged was $ 19,495. Approximately ten months after they began participating in the program (sometime in the middle of 2008) Franklin stopped providing its share of the payments and the Heckadons then discovered that they were obligated for the full loan amount and monthly payments of $ 649.37 per month.
In December of 2009, the Heckadons filed the Original MMPA Action against Chad and CFS, alleging violation of the MMPA. In May 2011, a jury awarded the Heckadons $ 647,421.39, including actual damages, punitive damages, and attorney’s fees on their MMPA claim.
Meanwhile, in October of 2008, Franklin initiated a bad faith lawsuit against Universal, eventually adding Tiffany Franklin, the wife of Chad Franklin, as a plaintiff. The bad faith lawsuit settled for $ 900,000 on August 31, 2010. The settlement agreement provided that $ 250,000 would go to Fifth Third Bank, a creditor; $ 383,629.59 to Monsees, Miller, Mayer, Presley & Amick (the attorneys who prosecuted the bad faith lawsuit for Franklin hereinafter referred to as "Mayer"); and $ 266,370.41 to Tiffany Franklin.
In April 2012, the Heckadons filed their petition in the instant action. In February of 2016, after repeated failures to compel Chad to appear at depositions, a hearing was held on the Heckadons' motion for sanctions. At that...
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