Kody Engineering Co., Inc. v. Fox & Fox Ins. Agency, Inc., 1171A242

• Decision Date: 15 November 1973
• Docket Number: No. 1171A242,1171A242
• Citation: 303 N.E.2d 307,158 Ind.App. 498,39 Ind.Dec. 537
• Parties: KODY ENGINEERING COMPANY, INC., and The Indiana National Bank, executor of the Estate of Miklos Sperling, Deceased, Appellant (Defendant below), v. FOX AND FOX INSURANCE AGENCY, INC., Appellee (Plaintiff below).
• Court: Indiana Appellate Court

Page 307

303 N.E.2d 307

158 Ind.App. 498

KODY ENGINEERING COMPANY, INC., and The Indiana National Bank, executor of the Estate of Miklos Sperling Deceased, Appellant (Defendant below), v. FOX AND FOX INSURANCE AGENCY, INC., Appellee (Plaintiff below).

No. 1171A242.

Court of Appeals of Indiana, Second District.

Nov. 15, 1973.

Rehearing Denied Jan. 15, 1974.

Clark & Clark, James C. Clark, Indianapolis, for appellant.

Baker & Orbison, Robert H. Orbison, Indianapolis, for appellee.

BUCHANAN, Presiding Judge.

CASE SUMMARY

Defendant-Appellant Miklos Sperling (Sperling) ¹ appeals from a judgment entered by the trial court in favor of Plaintiff-Appellee Fox and Fox Insurance Agency, Inc. (Fox) on its claim for money paid for the benefit of Sperling. Sperling We reverse.

claims that the evidence was insufficient to sustain the judgment on the basis of either contract or quasi-contract.

FACTS

The facts and evidence most favorable to the judgment of the trial court are:

On August 1, 1967, Sperling sold his business, Merz Engineering Company (Merz), and retired.

Some months later, in 1968, Sperling loaned $50,000.00 to Kody Engineering Co. (Kody), a corporation formed by three of Sperling's ex-employees at Merz. In exchange for this loan, Sperling acquired a security interest in Kody's equipment and accounts receivable. He had no equity interest in Kody nor was he an officer or director in that corporation.

Another of Sperling's ex-employees, Richard Myer (Myer), had served as comptroller and officer manager at Merz. When Merz was sold, Myer was retained by the new owners. Also, Meyer was employed by Kody as an accountant on a part-time basis.

In July of 1968, after Sperling had made the loan to Kody, Myer arranged a meeting between the principals in Kody and Fox for the purpose of negotiating an insurance program protecting Kody's property. Myer had previously 'referred' other insurance business to Fox.

Myer attended this gathering between Kody and Fox and, without Sperling's knowledge or consent, suggested to Fox that Sperling's security interest also be protected by the insurance. This was done. At this meeting no express undertaking to guarantee payment of the insurance premiums was made by Myer on behalf of Sperling. Fox was aware that Myer was not employed by Sperling when Myer suggested that Sperling be named on the policies.

Pursuant to these negotiations, Fox issued insurance policies protecting against various risks, including the machinery and equipment subject to Sperling's security interest. On the face of these policies, Sperling was named as mortgagee under a loss payable clause.

Evidence at trial established that Sperling and Fox maintained a separate business relationship on several unrelated insurance matters both before and during the period of insurance dealings between Fox and Kody.

Neither Fox nor Myer informed Sperling that he had been named as mortgagee on the policies nor sent him copies of the policies after they had been issued. For approximately eighteen months after the policies were issued, Fox advanced the premiums and in turn billed Kody. Fox never billed Sperling.

Kody was experiencing financial difficulties during this period of time and only made nominal payments on the premium indebtedness to Fox.

Sperling did become aware of the existence of these policies as well as the mounting premium debt owed to Fox by Kody, however, there was no evidence that he was aware that his security interest was covered by them.

Fox's president, David Fox, became concerned over this growing unpaid balance and conversed with Sperling on the subject of Kody's financial prospects. At trial, Fox gave the following account of this conversation:

'A. . . . From time to time he kept me abreast of what was going on in Kody and he (Sperling) was most disappointed, I know, in the performance of them and was most interested because he had a financial interest, as I did, and he lead me to believe that I would be protected, as he has always done in all the ventures that I have insured for him . . ..

Q. And, as a matter of fact, did Mr. Sperling assure you that you would get your money?

A. He did not put it down in writing but he assured me that I didn't have anything to worry about.'

No evidence was presented which would indicate that Sperling was aware he had been named on the policies when this conversation took place, or thereafter.

No loss claims were ever paid to Kody or Sperling under these policies.

Shortly after the above-described conversation, Kody became insolvent, leaving $4,660.16 indebtedness to Fox for the premiums.

On March 9, 1970, Fox filed suit against Kody naming Sperling as co-defendant. Trial was to the court on May 20, 1971, following which judgment was rendered against Sperling for the amount of the premiums. ² Sperling filed his Motion to Correct Errors, alleging that the judgment was contrary to law and not supported by sufficient evidence, which was overruled, and Sperling appeals.

ISSUE

The questions raised may be treated as constituting one issue:

Was evidence presented from which the trial court could reasonably infer that insurance protection was rendered at Sperling's request under circumstances requiring imposition of a quasi-contractual duty on Sperling's part to pay the insurance premiums?

Sperling contends that the evidence failed to establish his liability for payment under any contractual theory, including quasi-contract. Specifically, Sperling argues that no evidence was presented which could show either an express or implied request by him to be named on the policies, or a promise to pay the premium debt to Fox.

Fox apparently concedes that the evidence was insufficient to warrant a finding that a contract based upon a 'meeting of the minds' was ever consummated. In its brief Fox states:

'We are not dealing with that factual situation here as appellee did not recover in the lower court on the basis of an express contract but upon the basis of a quasi contract . . ..'

Fox does rely on the facts and reasonable inferences to be drawn from the evidence as giving rise to the imposition of a promise by Sperling to pay for the premiums separate from the intentions of the parties. Specifically he points to the elements necessary for quasi-contract recovery, i.e., (1) a benefit (insurance coverage) was rendered to Sperling, (2) at his implied request, (3) under circumstances in which equity should demand that Sperling compensate Fox therefor in order to prevent unjust enrichment.

He urges that the evidence was sufficient to find that Myer acted with apparent authority as Sperling's agent when he suggested to Fox that Sperling's interest be protected under the insurance; thereby imputing such a request to Sperling as a principal.

His argument also includes an 'anchor to windward.' Even if Myer were found to have acted without such apparent authority, he says, the trial court could reasonably infer from the testimony regarding the subsequent conversation between Sperling and Fox that Sperling ratified the request for coverage when he verbally assured Fox that he would be paid.

DECISION

CONCLUSION--It is our opinion that the evidence was insufficient to establish that Sperling impliedly requested insurance protection so as to impose a quasi-contractual duty upon him to pay the premiums.

Our consideration of this appeal must be governed by certain timeworn but honored rules of appellate procedure:

'It is only where the evidence is without conflict and leads to only one conclusion and the Trial Court reached a contrary conclusion that the decision will be disturbed as contrary to law i.e. that is where it affirmatively appears that reasonable men could not have arrived at the same judgment or conclusion. See Edward v. Wyllie, 246 Ind. 261, 203 N.E.2d 200 (1965). In this context, this Court, as a reviewing Court, will consider only the evidence most favorable to the decision of the Trial Court.' (Emphasis supplied.) Senst v. Bradley (1971), Ind.App., 275 N.E.2d 573, at 576.

See also, Minniear v. Estate of Metcalf (1972), Ind.App., 286 N.E.2d 700; Malo v. Bowlers Country Club (1972), Ind.App., 283 N.E.2d 806; Metz v. Madison (1971), Ind.App., 271 N.E.2d 197.

Also:

"It is well settled that an appellate tribunal will not weigh the evidence, but when the record discloses a failure of the evidence on any material question, it is the duty of this court to reverse the judgment." Legler v. Legler (1971), Ind.App., 273 N.E.2d 303 (note 2 at 305 citing Moellering v. Kayser (1887), 110 Ind. 533, 11 N.E. 604.

See also, MacCollum v. American Fletcher National Bank & Trust Co. (1972), Ind.App., 287 N.E.2d 265.

So our quest is to determine if there was an absence of evidence as to an essential element necessary to support the trial court's judgment.

As the parties apparently agree, ³ there was insufficient evidence to justify a finding that an express or implied contract was entered into between Sperling and Fox, the judgment is supportable only on the theory of a quasi or constructive contract.

A guide to the nature of such an obligation is provided by Board of Commissioners v. Greensburg Times (1938), 215 Ind. 471, 480, 19 N.E.2d 459, 462:

'Quasi contracts are a class of obligations which are imposed or created by law without regard to the assent of the party bound. They rest solely on a legal fiction and are not contracts at all in the true sense, for there is no agreement. They arise from law or natural equity and are clothed with the semblance of contracts merely for the purposes of the remedy. Among the instances out of which quasi or constructive contracts may arise are those where there is a legal duty to pay, independent of any contract relationship, coupled with a consideration moving to the party sought to be charged.' (Emphasis supplied.)

See also, Clark v. Peoples Savings and Loan Association of DeKalb County (1943), 221 Ind. 168, 46 N.E.2d 681...