Hershberger v. Young

• Decision Date: 13 November 2001
• Docket Number: WD59120
• Citation: 59 S.W.3d 614
• Parties: Fred O. and Treasa C. Hershberger, Appellants, v. Roger D. Young, Respondent. WD59120 Missouri Court of Appeals Western District
• Court: Missouri Court of Appeals

Fred O. and Treasa C. Hershberger, Appellants v Roger D. Young, Respondent

WD59120

Missouri Court of Appeals Western District

11/13/2001

Appeal From: Circuit Court of Jackson County, Hon. William S. Nixon

Counsel for Appellant: George D. Nichols

Counsel for Respondent: Dawn A. Morville Johnson

Opinion Summary:

Fred and Treasa Hershberger appeal the court's grant of summary judgment in favor of Roger D. Young, their insurance agent, on the Hershbergers' petition for breach of fiduciary duty, negligence and breach of contract. In their petition, the Hershbergers alleged that they were the beneficiaries on a policy that insured the life of Kevin E. Meyer, and that Young failed to properly and accurately characterize their business relationship with Meyer on the policy application. The Hershbergers contend that, as a result, the probate court entered judgment against them in a discovery of assets proceeding brought by Meyer's estate to determine the Hershbergers' interest in the life insurance proceeds. On appeal, the Hershbergers argue that genuine issues of material fact exist regarding whether Young's breach of fiduciary duty, negligence and breach of contract caused the probate court to enter judgment against them. They also argue that the probate court's judgment does not collaterally estop them from litigating their present claims.

Division IV holds: The court did not err in granting summary judgment in favor of Young. In the prior judgment, the probate court found that the Hershbergers did not have an insurable business relationship with Meyer beyond that of debtor-creditor. Because the probate court's judgment was on the merits, the Hershbergers were a party to the proceeding and had a full and fair opportunity to litigate the issue, the Hershbergers are collaterally estopped from relitigating the existence of an insurable business relationship in this proceeding. The probate court's finding of a lack of an insurable business relationship negates the causation element of the Hershbergers' claims of breach of fiduciary duty, negligence and breach of contract against Young. Thus, the trial court in this case properly concluded that Young was entitled to judgment as a matter of law.

Spinden, P.J., and Newton, J., concur.

Patricia Breckenridge, Judge

Fred and Treasa Hershberger appeal the trial court's grant of summary judgment in favor of Roger D. Young, their insurance agent, on the Hershbergers' petition for breach of fiduciary duty, negligence, and breach of contract. In their petition, the Hershbergers alleged that they were the beneficiaries on a policy that insured the life of Kevin E. Meyer, and Mr. Young failed to properly and accurately characterize their business relationship with Mr. Meyer on the policy application. The Hershbergers contend that, as a result, the probate court entered judgment against them in a discovery of assets proceeding brought by Mr. Meyer's estate to determine the Hershbergers' interest in the life insurance proceeds.

On appeal, the Hershbergers argue that genuine issues of material fact exist regarding whether Mr. Young's breach of fiduciary duty, negligence, and breach of contract caused the probate court to enter judgment against them. They also argue that the probate court's judgment does not collaterally estop them from litigating their present claims. This court finds that the probate court determined that the Hershbergers have no insurable interest in the life insurance proceeds as business associates, the Hershbergers are collaterally estopped from relitigating that finding, and that finding precludes recovery on their present claims. Therefore, the summary judgment in favor of Mr. Young is affirmed.Factual and Procedural Background

When reviewing summary judgments, this court reviews the record, and any reasonable inferences from the record, "in the light most favorable to the party against whom judgment was entered." ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). Thus, this court will review the record in the light most favorable to the Hershbergers. In 1984, the Hershbergers began operating "Burger Boy," a restaurant on 3rd Street in Lee's Summit. In the late 1980's, the Hershbergers hired Kevin E. Meyer as a cook in the restaurant. Mr. Meyer was a bright young man and a very hard worker. Mr. Meyer's superior performance as an employee of Burger Boy was one of the reasons the Hershbergers were able to open a second restaurant on 291 Highway in Lee's Summit in 1990. In 1993, Mr. Meyer left Burger Boy to pursue other opportunities, despite the fact that he had advanced to manager of the 3rd Street restaurant.

Mr. Meyer returned to Burger Boy in October 1994, when he bought the 3rd Street Burger Boy from the Hershbergers. Pursuant to the terms of the parties' sale contract, the Hershbergers, as trustees of their revocable trust, were the sellers, and Mr. Meyer was the buyer. The purchase price was $410,000, which consisted of $400,000 for the real estate, and $10,000 for the equipment. Mr. Meyer made a down payment of $10,000 toward the real estate price, and the Hershbergers financed the remaining $390,000 of the real estate price and all of the $10,000 equipment price, as evidenced by two promissory notes Mr. Meyer signed. The real estate note was to be paid in monthly installments over 15 years, while the equipment note was to be paid in monthly installments over 5 years. The notes were secured by a deed of trust on the real estate and a security agreement on the equipment.

In addition to executing the sale contract, promissory notes, deed of trust and security agreement, Mr. Meyer also executed a license agreement with Burger Boy, Inc., a corporation of which Mr. Hershberger was the president and sole shareholder. Under the license agreement, after Mr. Meyer paid off the real estate note, he was to begin paying Burger Boy, Inc., $1000 per month in license fees for the use of Burger Boy service mark, trade name, and trade secrets. Mr. Meyer also agreed to operate the restaurant in accordance with Burger Boy's standards of operation and quality, and to diligently promote and make every reasonable effort to increase Burger Boy's business through advertising. The term of this license agreement was 30 years.

After the closing on the sale of the restaurant to Mr. Meyer, Mr. Hershberger contacted Steve Hamilton, a financial adviser who provided financial planning services to Mr. Hershberger and Mr. Meyer. Mr. Hershberger asked that Mr. Hamilton obtain quotes for a $400,000 life insurance policy on Mr. Meyer's life, with Mr. Hershberger as the beneficiary. Mr. Hamilton understood that "Mr. Hershberger wanted the policy for his own protection, as he had personally financed the sale of the store to Mr. Meyer and had an ongoing business relationship with Mr. Meyer." To Mr. Hamilton's knowledge, "there was no agreement that the insurance proceeds were to be used to pay Mr. Meyer's outstanding debt to Mr. Hershberger." Mr. Meyer never indicated to Mr. Hamilton that any insurance policy would pay off Mr. Meyer's debt to Mr. Hershberger in the event of Mr. Meyer's death. Mr. Hershberger did not use the quotes Mr. Hamilton provided him.

Instead, Mr. Hershberger contacted Mr. Young, who was an insurance agent with Farmers Insurance Company, and requested quotes for a $400,000 policy insuring Mr. Meyer's life. Mr. Young had provided insurance services to both Mr. Hershberger and Mr. Meyer in the past. Mr. Young provided Mr. Hershberger with several quotes; however, Mr. Hershberger decided to purchase insurance from a different carrier, North American Company for Life and Health Insurance.

Even though Mr. Hershberger decided to purchase the policy from North American and not Farmers, Mr. Young helped Mr. Hershberger and Mr. Meyer partially complete the North American policy application. Mr. Young filled in several sections of the application in his own handwriting. Mr. Hershberger and Mr. Meyer signed the application.

One of the sections of the application Mr. Young completed was entitled, "Name of Owner if Other than Proposed Insured." In this section, Mr. Young listed Fred Hershberger. On the line indicating Mr. Hershberger's relationship to Mr. Meyer, Mr. Young filled in "Franchisor/Mortgagee." Under the beneficiary section, which was also completed by Mr. Young, he listed Fred Hershberger as the primary beneficiary, and described Mr. Hershberger's relationship to Mr. Meyer as "Mortgagee." Mr. Young listed Treasa Hershberger as the contingent beneficiary, and described her relationship to Mr. Meyer also as "Mortgagee."

Despite the fact that on the application, Mr. Young described Mr. Hershberger's relationship to Mr. Meyer as that of a franchisor or mortgagee, and Mrs. Hershberger's relationship to Mr. Meyer as that of a mortgagee, Mr. Young believed "wholeheartedly" that the policy was not taken out to cancel Mr. Meyer's debt on the promissory notes in the event of Mr. Meyer's death. According to Mr. Young, Mr. Hershberger did not need insurance coverage to satisfy Mr. Meyer's debt on the promissory notes, since he was secured by the deed of trust. Instead, Mr. Young believed that Mr. Hershberger was obtaining the insurance policy to protect his "ongoing business relationship" with Mr. Meyer.

Mr. Young based this belief on conversations he had with Mr. Meyer and Mr. Hershberger. When Mr. Young discussed the life insurance policy with Mr. Meyer, Mr. Young told Mr. Meyer that the policy was to insure the ongoing business relationship between Mr. Hershberger and Mr. Meyer. Mr. Young suggested to Mr. Meyer that he purchase a separate life insurance policy to pay off his debts from his business ventures, including the promissory notes to the Hershbergers, in the event of his death. Mr. Meyer told Mr. Young that he was "not interested" in purchasing life insurance for that debt, because he believed that...