Hogs Unlimited v. Farm Bureau Mut. Ins. Co., No. C0-85-2270

• Court: Minnesota Supreme Court
• Writing for the Court: SIMONETT
• Citation: 401 N.W.2d 381
• Parties: HOGS UNLIMITED, a general partnership, et al., Respondent, v. FARM BUREAU MUTUAL INSURANCE COMPANY, petitioner, Appellant.
• Docket Number: No. C0-85-2270
• Decision Date: 27 February 1987

Page 381

401 N.W.2d 381 64 A.L.R.4th 701 HOGS UNLIMITED, a general partnership, et al., Respondent,
v.
FARM BUREAU MUTUAL INSURANCE COMPANY, petitioner, Appellant. No. C0-85-2270. Supreme Court of Minnesota. Feb. 27, 1987.

Page 382

Syllabus by the Court

1. The intentional destruction of partnership property by one partner constitutes malicious mischief against the partnership property interests of the innocent partners, and the provision in an insurance policy voiding the policy for fraud of "the insured" does not void the policy coverage for innocent insureds.

2. Innocent partners may recover proportionately under their insurance policy for malicious mischief to partnership property by another partner to the extent of their tenancy in partnership interest.

3. An award of prejudgment interest on the unliquidated claim for loss of special breeding sows was inappropriate.

Terrence R. Joy, Patricia J. St. Peter, Minneapolis, for appellant.

Joseph Pingatore, Rochester, for respondent.

Heard, considered, and decided by the court en banc.

SIMONETT, Justice.

This case raises questions about whether and under what circumstances two innocent partners may recover under a casualty insurance policy for partnership property intentionally destroyed by the third partner. The courts below allowed recovery for two-thirds of the property loss, plus prejudgment interest. We affirm in part, reverse in part, and remand.

Hogs Unlimited is a general partnership, consisting of three partners, Dennis Bremer, Curtis Zillgitt, and Raymond Cerise. The partnership was in the business of raising pigs and had approximately 250 breeding sows. The animals were kept on the farm premises of Cerise, who handled the day-to-day operation. In September 1982, appellant-defendant Farm Bureau Mutual Insurance Company issued an insurance policy covering the partnership personal property, with Hogs Unlimited, Dennis Bremer, Curtis Zillgitt, and Raymond Cerise all listed as named insureds.

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Also named in a loss payable clause was Production Credit Association, which held a mortgage on the hogs.

On October 31, 1982, while the policy was in effect, someone placed a hose in the hog barn, releasing anhydrous ammonia and causing the death of 243 hogs. At the time, the partnership owed approximately $40,000 on a feed bill, and the breeding stock was allegedly infected with parvo virus. The partnership had never shown a profit. The three partners submitted a sworn proof of loss claim, stating the cause of the loss was "Apparent anhydrous ammonia poisoning with the origin unknown at this time. The matter is currently under investigation by the Wabasha County Sheriff's Dept." The value of the hogs was alleged to be $428,250, and claimants asked for the $250,000 policy limits under the standard peril coverage for "Vandalism or malicious mischief." Farm Bureau denied the claim, asserting that Raymond Cerise, or someone acting on his behalf, had intentionally destroyed the hogs.

Plaintiffs Hogs Unlimited, Dennis Bremer, and Curtis Zillgitt then commenced this lawsuit against defendant Farm Bureau for recovery of their loss. Plaintiffs did not include Cerise as a party, either as a plaintiff or as a defendant, nor was PCA made a party. Farm Bureau denied liability, asserting that Raymond Cerise, or someone acting on his behalf, had intentionally killed the hogs. Farm Bureau stated it was not claiming Bremer or Zillgitt were in any way involved in causing the loss of the hogs. No one deposed Cerise.

Plaintiffs then moved for summary judgment. The trial court ruled as a matter of law that the destruction of the hogs was "by the willful act of Raymond L. Cerise, independent of the plaintiffs and malicious to their property interests," and that the two individual plaintiffs were entitled to collect their proportionate share of the covered loss. Thereafter the parties stipulated to total damages of $175,000, and the trial court entered judgment for plaintiffs Dennis Bremer and Curtis Zillgitt for $116,666, plus prejudgment interest of $17,549.

On appeal, the court of appeals affirmed, holding that there was insurance coverage, that any wrongdoing by Cerise would not bar the two innocent parties from recovering their proportionate shares, and that plaintiffs were entitled to prejudgment interest. Hogs Unlimited v. Farm Bureau Mutual Insurance Co., 390 N.W.2d 886 (Minn.App.1986). We granted Farm Bureau's petition for further review.

I.

Apparently the parties agree, for the purpose of this lawsuit, that Raymond Cerise destroyed the hogs. ¹ Assuming this to be true, the first issue is whether the loss comes within the covered peril of "Vandalism or malicious mischief," which the policy defines as "meaning only the willful and malicious damage to or destruction of the property covered."

The policy definition requires that the destruction be both willful and malicious. Clearly, the poisoning of the hogs was intentional, hence willful. But was it also malicious? To be malicious, we think, it is not necessary that there be ill will or a vindictive purpose, but it is enough if the destruction of the property was in conscious or intentional wrongful disregard of the rights of others in the property. King v. North River Insurance Co., 297 S.E.2d 637 (S.C.1982); Couch on Insurance (2d rev.ed.) § 42:631 (1982). In other words, the malice in malicious mischief is directed not at the property itself, but at some individual or legal entity, private or public, having rights in the property. It follows, therefore, that a person who intentionally destroys his or her own property does not commit malicious mischief, for what one deliberately chooses to do to one's own property is not in disregard of one's rights in that property.

In this case, the hogs were owned by the partnership, Hogs Unlimited. But,

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in addition, each partner is a "coowner with the other partners of specific partnership property holding as a tenant in partnership." Minn.Stat. § 323.24 (1986). See Kangas v. Winquist, 207 Minn. 315, 317, 291 N.W. 292, 293-94 (1940). Consequently, in destroying the hogs, at least to the extent Cerise destroyed his own "tenant in partnership" property interest, no malicious mischief occurred.

But while Cerise's poisoning of the hogs may not have been in disregard of his own partnership property interest, it was in disregard of the property interests of his copartners. The innocent copartners had legally cognizable, separate though undivided, partnership property interests in the hogs, for which they had understandably sought and obtained insurance protection. Farm Bureau, indeed, recognized these separate insurable interests by listing Zillgitt and Bremer, as well as Hogs Unlimited and Cerise, as separate named insureds. See Closuit v. Mitby, 238 Minn. 274, 279, 56 N.W.2d 428, 431 (1953) (a partner has an insurable interest in partnership property). As to the innocent insureds, the malicious destruction of their property was a fortuitous event. We hold, therefore, that Cerise's destruction of the hogs was an act of malicious mischief to the partnership property interests of the two innocent partners and within the coverage of Farm Bureau's policy.

II.

Farm Bureau points out that Cerise attempted to defraud it twice, first, when he destroyed the hogs, and, second, when he stated in the proof of loss that the origin of the poisoning was "unknown." ² Even if there is malicious mischief coverage for plaintiffs' loss, Farm Bureau contends the coverage is voided by the "fraud clause" in its policy. We disagree.

Farm Bureau's policy says:

This entire policy shall be void if, whether before a loss, the insured has willfully, or after a loss, the insured has willfully and with intent to defraud, concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof or the...