Lewellen v. Universal Underwriters Ins. Co.

Decision Date13 February 2019
Docket NumberC/w WD 81186, WD 81260 and WD 81364,WD 81171
Citation574 S.W.3d 251
Parties Lillian M. LEWELLEN, Appellant-Respondent, v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY, et al. Chad Franklin, Chad Franklin National Auto Sales North, LLC and CFS Enterprises, Inc., Respondent-Appellant.
CourtMissouri Court of Appeals

Douglass F. Noland, Kate E. Noland, Liberty for appellant-respondent.

John G. Schultz, Michael W. Shunk, Kansas City; Brian E. McGovern, Andrew M. Lammert, Town and Country, Timothy J. Ahrenhoesterbaeumer, Chesterfield, for respondent-appellant.

Before Division One: Lisa White Hardwick, Presiding Judge, Edward R. Ardini and Thomas N. Chapman, Judges

Lisa White Hardwick, Judge

This appeal and cross-appeal arises from judgments entered by the circuit court on Lillian Lewellen’s claims against Chad Franklin, Chad Franklin National Auto Sales North, LLC, and CFS Enterprises, Inc. (collectively "Franklin")1 and Universal Underwriters Insurance Company and Zurich American Insurance Company (collectively "Universal").2

Lewellen appeals: (1) the judgment denying insurance coverage on her claim that Franklin committed fraudulent misrepresentation in the sale of a vehicle; (2) the summary judgment in favor of Universal on her claims concerning a civil conspiracy to commit a fraudulent transfer and violations of the Missouri Merchandising Practices Act ("MMPA"); and (3) the summary judgment in favor of Universal on her claim for tortious interference with a business expectancy.

Universal cross-appeals the judgment granting insurance coverage for actual and punitive damages on Lewellen’s MMPA claim. Franklin’s cross-appeal alleges a series of procedural and evidentiary errors that he contends resulted from the improper striking of his pleadings after several alleged discovery violations.

For reasons explained herein, we affirm in part, reverse in part, and remand for proceedings consistent with this opinion.


In October of 2007, Lewellen purchased a vehicle at Franklin’s car dealership during the "Drive for Life" promotion. Based on the promotion, a sales representative told Lewellen that she could purchase a vehicle and make payments of $49.00 a month for one year, at which time she could return the car and pick a new vehicle under the same payment arrangement. Lewellen signed loan documents stating that she would be responsible for making market-rate payments for the vehicle; however, she was reassured by the sales representative that, pursuant to the promotion, Franklin would send her monthly checks to offset the difference between the $49.00 promotional price and the market rate. After the purchase, Lewellen received the offset payments from Franklin for approximately six months. She was unable to make the market-rate payments once the offset payments stopped, and her vehicle was repossessed.

In 2008, Franklin became a party to several lawsuits alleging a variety of claims and damages relating to the "Drive for Life" promotion. During this time, Franklin was insured by Universal. Universal denied defense and coverage for the claims.

On October 21, 2008, Chad and CFS Enterprises, Inc. filed suit against Universal alleging wrongful denial of their insurance defense. In December 2009, Chad and Chad Franklin National Auto Sales North filed a second lawsuit against Universal alleging bad faith. Tiffany Franklin, who at the time was Chad’s wife, was also a named insured on the Universal policy and was added as a party to both lawsuits. David Mayer of the law firm Monsees, Miller, Presley, & Amick, P.C. represented all plaintiffs in these lawsuits against Universal.

On August 31, 2010, Universal, Franklin, and Tiffany Franklin agreed to a settlement that disposed of the bad faith claims against Universal. As part of the settlement, Universal agreed to make a payment of $900,000 to Chad and Tiffany Franklin. These funds were disbursed as follows: $250,000 to Fifth Third Bank, $266,370.41 to Tiffany Franklin, and $383,629.59 to Mayer’s law firm. The distribution to Fifth Third Bank, a secured creditor of Franklin’s car dealership operation, was made pursuant to a garnishment filed against Universal. This $900,000 settlement agreement is the transfer that Lewellen would later allege was fraudulently made between Universal and Franklin.

On December 15, 2010, Lewellen filed suit against Franklin alleging fraudulent misrepresentation and violations of the MMPA. In June 2012, Lewellen was awarded $25,000 in actual damages and $1 million in punitive damages against Chad individually for his fraudulent misrepresentation, and $25,000 in actual damages and $500,000 in punitive damages against Chad Franklin National Auto Sales North, LLC for a violation of the MMPA.3 Lewellen was also awarded attorneys' fees totaling $82,810.00.

In April 2013, Lewellen filed the instant action against Universal and Franklin. In Counts I and II of her third amended petition, Lewellen asserted equitable garnishment and declaratory judgment claims against Universal seeking insurance coverage for the judgment against Chad and Chad Franklin National Auto Sales North on her fraudulent misrepresentation and MMPA claims. In Counts III through VII, Lewellen asserted claims of fraudulent transfer, MMPA violations, civil conspiracy, joint venture/joint enterprise, and a bill in equity against Universal and Franklin based upon their August 2010 settlement agreement. In Count VIII, Lewellen asserted a claim of tortious interference with a business expectation against Universal.4

The court held a bench trial on Counts I and II of Lewellen’s third amended petition. Count I alleged an equitable garnishment claim against Universal in which she sought coverage for the judgment against Chad and Chad Franklin National Auto Sales North on her fraudulent misrepresentation and MMPA claims. Count II requested a judgment declaring that Franklin’s insurance policy with Universal applied to Lewellen’s judgment and damages. The court declined to reach Count II and entered judgment on Count I finding that Lewellen’s fraudulent misrepresentation claim was not entitled to coverage, but that her MMPA claim was covered under Franklin’s policy with Universal.

In March 2017, the court granted summary judgment in favor of Universal on Counts III through VIII. Discovery proceeded on Lewellen’s claims against Franklin. After Chad failed to appear for his deposition, the court struck Franklin’s responsive pleadings and entered a default judgment in Lewellen’s favor on the fraudulent transfer and MMPA claims. During a subsequent trial on damages, the jury awarded Lewellen $266,370.41 in actual damages and $450,000 in punitive damages on each of her two claims. The punitive damages were divided among the defendants: Chad was assessed $250,000 ($500,000 total) individually, while Chad Franklin National Auto Sales North and CFS Enterprises were each assessed $100,000 ($200,000 total). The court merged the actual damages on the two claims but granted the total amount of punitive damages and awarded Lewellen $189,060 in attorneys' fees. Lewellen appeals. Franklin and Universal cross-appeal.

I. Equitable Garnishment Judgment

Both Lewellen and Universal challenge the equitable garnishment judgment in several of their points on appeal. Lewellen contends the court erred in denying insurance coverage for the damages awarded on her fraudulent misrepresentation claim, while Universal contends the court erred in allowing coverage for the damages awarded to Lewellen on her MMPA claim.

A. Standard of Review

In determining whether Universal’s policy affords coverage for the damages awarded Lewellen, we interpret the insurance policy de novo. Swadley v. Shelter Mut. Ins. Co. , 513 S.W.3d 355, 357 (Mo. banc 2017). Our review of factual determinations made by the circuit court, however, are reviewed under the standard set forth in Murphy v. Carron , 536 S.W.2d 30, 32 (Mo. banc 1976). Vill. at Deer Creek Homeowners Ass'n Inc. v. Mid-Continent Cas. Co. , 432 S.W.3d 231, 239 (Mo. App. 2014). Thus, we will affirm the circuit court’s judgment "unless there is no substantial evidence to support it or unless it is against the weight of the evidence, it erroneously declares the law, or it erroneously applies the law." Schmitz v. Great Am. Assurance Co. , 337 S.W.3d 700, 705 (Mo. banc 2011). We "must view the evidence in a light most favorable to the judgment and disregard all contrary evidence and permissible inferences." Rissler v. Heinzler , 316 S.W.3d 533, 536 (Mo. App. 2010).

In reviewing the language contained in insurance policies, we apply the meaning of the terms that "would be attached by an ordinary person of average understanding if purchasing insurance," Seeck v. Geico Gen. Ins. Co. , 212 S.W.3d 129, 132 (Mo. banc 2007) (internal citation and quotations omitted), and we will interpret the contract "as to afford coverage rather than defeat" it. Universal Underwriters Ins. Co. v. Dean Johnson Ford, Inc. , 905 S.W.2d 529, 533 (Mo. App. 1995). Where no ambiguity exists, we will enforce the contract according to its terms. Swadley , 513 S.W.3d at 357. However, if we find an ambiguity within the policy, we will resolve that ambiguity against the insurer. Id.

"An ambiguity exists when there is duplicity, indistinctness, or uncertainty in the meaning of the language in the policy. Language is ambiguous if it is reasonably open to different constructions." Id. (internal citation and quotations omitted). Further, we do not review each provision of a policy in isolation but instead evaluate the policy as a whole. Seeck , 212 S.W.3d at 133.

B. Coverage for Fraudulent Misrepresentation Claim
i. The fraud and dishonest act exclusion is not ambiguous.

In Point I, Lewellen contends the circuit court erred in denying insurance coverage for the damages...

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