Hoosier Ins. Co., Inc. v. Mangino

• Decision Date: 28 April 1981
• Docket Number: No. 1-580A131,1-580A131
• Citation: 419 N.E.2d 978
• Parties: HOOSIER INSURANCE COMPANY, INC., Defendant-Appellant, v. Charles R. MANGINO and Diane S. Mangino, Plaintiffs-Appellees.
• Court: Indiana Appellate Court

Page 978

419 N.E.2d 978

HOOSIER INSURANCE COMPANY, INC., Defendant-Appellant, v. Charles R. MANGINO and Diane S. Mangino, Plaintiffs-Appellees.

No. 1-580A131.

Court of Appeals of Indiana, First District.

April 28, 1981.

Stephen M. Gentry, Speedway, for defendant-appellant.

L. Eric Bauer, Bauer, Miller & Bauer, Terre Haute, N. George Nasser, Terre Haute, for plaintiffs-appellees.

NEAL, Presiding Judge.

STATEMENT OF THE CASE

Defendant-appellant Hoosier Insurance Company, Inc. (Hoosier) appeals a judgment entered in Vigo Superior Court upon a jury verdict in favor of plaintiffs-appellees Charles R. Mangino and Diane S. Mangino (Manginos) for damages resulting from a breach of contract. Hoosier challenges the trial court's judgment awarding punitive damages.

We reverse.

STATEMENT OF THE FACTS

The facts most favorable to the judgment disclose that on the morning of December 22, 1976, a home which the Manginos were purchasing on contract from John and Norma Walker (Walkers) was destroyed by fire. Manginos lost most of their personal possessions. Several hours before the fire, which was reported at approximately 1:00 a. m., Manginos and their children had left home to visit with relatives in Ohio during the Christmas holidays.

Later, on the same day of the fire, Mrs. Mangino placed a telephone call from Ohio to Walkers in Indiana. She testified that the purpose of the phone call was to inform the Walkers of a late payment on a personal loan. During that same phone conversation, Mrs. Walker told Mrs. Mangino of the fire and how everything was lost. Sometime after Christmas day Manginos returned home to Lewis, Indiana, and made arrangements with Walkers for a new place to live.

Manginos had entered into the land sale contract on June 1, 1974. At the time of the fire, the premises were protected by a policy of insurance issued by Hoosier. Manginos were the named insureds; Walkers On December 28, 1976, Manginos met with Mr. Thomas Bursott (Bursott), an insurance adjuster and branch manager of General Adjustment Bureau, Inc. Bursott had been assigned by Hoosier to handle Manginos' claim. Bursott explained to them that before he could proceed with their claim, Manginos had to sign a non-waiver agreement which provided, in essence, that the insurance policy conditions could not be waived by Bursott's investigation. Bursott then gave Manginos a proof of loss form and suggested they consult product catalogs to estimate the value of possessions destroyed in the fire. Mrs. Mangino testified Bursott had said they would receive cost of living expenses. Bursott advised Manginos to retain copies of all receipts and transactions for food and lodging since the fire.

were listed as mortgagees, and, as such, were co-insureds under the same insurance contract. Mrs. Walker testified that she customarily paid Hoosier the monthly insurance premium and Manginos reimbursed her.

On December 31, 1976, three days after Bursott's first meeting with Manginos, they remitted an itemized statement ¹ of personal property they had lost in the fire. They also had collected unsworn statements of neighbors which described Manginos' possessions. On January 10, 1977, Bursott received a completed and notarized proof of loss form signed by Manginos which Bursott returned to Hoosier. On February 24, 1977, Hoosier sent a letter to Manginos denying its liability for the loss, stating its reason for doing so, returning an unearned premium of $75 on Manginos' indemnity policy, and voiding the policy as to Manginos.

On July 12, 1977, Manginos sued Hoosier for "a malicious breach of contract, designed to harass and oppress Plaintiffs (Manginos)." Manginos' complaint sought exemplary damages in addition to compensation for the loss. Judgment was entered upon a jury verdict in favor of Manginos awarding them legal title to the real estate, compensatory damages of $16,950, and punitive damages of $30,000.

ISSUES

Hoosier raises four issues on review:

"I. Whether the court erred in overruling Defendant's (Hoosier's) motion for judgment on the evidence at the close of all the evidence as to the issue of punitive damages;

II. Whether the verdict of the jury and the judgment of the court thereon was contrary to law and the evidence as to the issue of punitive damages;

III. Whether the verdict of the jury and the judgment of the court thereon was supported by sufficient evidence as to the issue of punitive damages; and

IV. Whether the verdict of the jury and the judgment of the court thereon for the sum of $30,000 in punitive damages was excessive and a result of passion, prejudice and confusion."

Our resolution of Issue II is dispositive.

DISCUSSION AND DECISION

Hoosier does not appeal the compensatory damage award for its breach of contract. However, Hoosier argues that the record contains no evidence of tortious conduct which would support the jury verdict on punitive damages. As a general rule, a party injured by a breach of contract is entitled to recover only the loss actually In First Federal Savings and Loan Association of Indianapolis v. Mudgett, (1979) Ind.App., 397 N.E.2d 1002, this court wrote an extensive review of Indiana law on punitive damages arising out of a breach of contract. As we stated there and as Hoosier correctly states in its brief, the general rule is punitive damages are not recoverable in contract actions. Hibschman Pontiac, Inc. v. Batchelor, (1977) 266 Ind. 310, 362 N.E.2d 845; Vernon Fire & Casualty Ins. Co. v. Sharp, (1976) 264 Ind. 599, 349 N.E.2d 173; Harper v. Goodin, (1980) Ind.App., 409 N.E.2d 1129; Southern, School Buildings, Inc. v. Loew Electric Inc., (1980) Ind.App., 407 N.E.2d 240; Mudgett, supra; Standard Land Corporation of Indiana v. Bogardus, (1972) 154 Ind.App. 283, 289 N.E.2d 803; Murphy Auto Sales, Inc. v. Coomer, (1953) 123 Ind.App. 709, 112 N.E.2d 589. However, where the breach also includes conduct (1) which independently establishes the elements of a common law tort such as fraud or (2) where elements of fraud, malice, gross negligence or oppression mingle in the controversy, Indiana courts will allow the imposition of punitive damages provided that the public interest is served by the deterrent effect of the punitive damages award. Vernon Fire & Casualty Ins. Co., supra; Harper v. Goodin, (1980) Ind.App., 409 N.E.2d 1129; Art Hill Ford, Inc. v. Callender, (1980) Ind.App., 406 N.E.2d 340; Mudgett, supra; Jeffersonville Silgas, Inc. v. Wilson, (1972) 154 Ind.App. 398, 290 N.E.2d 113.

suffered. Stoneburner v. Fletcher, (1980) Ind.App., 408 N.E.2d 545; Ogle v. Wright, (1977) 172 Ind.App. 300, 360 N.E.2d 240.

Hoosier contends that the facts in the case at bar do not support an inference of bad faith, malice, fraud or oppressive conduct on its part. The Court of Appeals, in reviewing a jury verdict, is not to weigh evidence or resolve credibility of witnesses, but rather, is limited to determining whether the verdict is sustained by substantial evidence of probative value. Fleetwood Corporation v. Mirich, (1980) Ind.App., 404 N.E.2d 38; Rees v. Heyser, (1980) Ind.App., 404 N.E.2d 1183; American Optical Company v. Weidenhamer, (1980) Ind.App., 404 N.E.2d 606; Johnson v. Ross, (1980) Ind.App., 405 N.E.2d 569; Summerlot v. Summerlot, (1980) Ind.App. 408 N.E.2d 820. We presume that the award of damages by the trial court rested upon those allegations which were sustained by the evidence. Prudential Company of America v. Executive Estates, (1977) Ind.App., 369 N.E.2d 1117. Only when the evidence is without conflict and leads to but one conclusion and the fact finder reached a contrary conclusion will the Court of Appeals disturb the decision as contrary to law. Thompson v. Lee, (1980) Ind.App. 402 N.E.2d 1309. This court, in Harper, supra, at 1133, described with particularity the kind of conduct that must be shown in order to permit an award of punitive damages:

"The promisor's motive for breaching a contract is generally regarded as irrelevant because the promisee will be compensated for all damages proximately resulting from the promisor's breach. Where the facts surrounding the promisor's breach indicate substandard business conduct, the promisee may also enjoy a limited sense of requital in taking his business elsewhere in the future but he is not entitled to mulct the promisor in punitive damages.

Something more than a state of mind described as heedless disregard of the consequences is required for the imposition of punitive damages in breach of contract cases. Actual malice, or wantonness from which the law can imply malice, must be shown. The word 'reprehensible' is used, as where there is conscious and deliberate conduct. Deceit is involved. Negligent conduct or incompetence is insufficient." (Emphasis added.)

See also Appleman, Insurance Law and Practice § 11256; Couch, Cyclopedia of Insurance Law (2nd ed.) § 58:49. Upon deciding Murphy Auto Sales, Inc., supra, at 717-718, the Indiana Appellate Court, sitting in banc, stated the purpose for allowing punitive damages in contract actions as follows:

"Punitive or exemplary damages do not rest upon any ground of abstract or theoretical Also, in Nate v. Galloway, (1980) Ind.App., 408 N.E.2d 1317, 1323, Judge Hoffman stated, "The purpose of such award (punitive damages) is to punish the wrongdoer and to deter others from engaging in similar conduct in the future." Quite clearly, then, punitive damages are not intended to compensate the claimant but rather to penalize the wrongdoer.

justice but upon the basis of an established public policy which seeks to promote the public safety and to punish through the medium of a civil proceeding a fraudulent wrongdoer, and where malice, gross fraud and oppressive conduct is shown punitive damages are allowable to deter other wrongdoers from offending in a like manner." (Emphasis added.)

The principal issue before us it whether punitive damages will lie for Hoosier's refusal to pay Manginos' claim...