M. F. A. Mut. Ins. Co. v. Gulf Ins. Co.
| Decision Date | 28 October 1969 |
| Docket Number | No. 2,No. 53768,53768,2 |
| Citation | 445 S.W.2d 829 |
| Parties | M.F.A. MUTUAL INSURANCE COMPANY, a Corporation, Appellant. v. GULF INSURANCE COMPANY, a Corporation, and Mike Maksin and Lela J. Maksin, Respondents, Earl M. Parker, Appellant, Respondent |
| Court | Missouri Supreme Court |
Adolph K. Schwartz, St. Louis, for M.F.A. Mutual Insurance Company, appellant (plaintiff).
Willson, Cunningham & McClellan, J. H. Cunningham, Jr., St. Louis, for respondent, Gulf Insurance Company.
Thurman, Nixon, Smith & Howald, Louis Jerry Weber, Hillsboro, for defendant-appellant.
STOCKARD, Commissioner.
Mike and Lela Maksin (hereafter referred to as 'owners') entered into a contract with Earl M. Parker (hereafter referred to as 'contractor') for the construction of a house on land owned by them for a total price of $28,000, with additional payments for extras ordered by owners. Payments by owners to the contractor were to be made in the amounts and at the times provided for in the contract as the construction work progressed. After owners had paid $17,125 (which included $265 for extras), and after the contractor had expended $21,781.77, 1 the partially constructed building was totally destroyed by fire on January 4, 1967.
On November 4, 1966, Gulf Insurance Company (hereinafter referred to as 'Gulf') issued to owners its 'builders' risk' policy on the building insuring them against the risk of fire in the 'provisional amount' of $30,000, but providing that on 'any day' the policy was in force the 'actual amount of insurance' was 'that proportion of the provisional amount that the actual value of the described property on that date bears to the value of the date of completion,' but not in excess of the provisional amount. This policy also contained the provision that Gulf 'shall not be liable for a greater proportion of any loss than the amount hereby insured shall bear to the whole insurance covering the property against the peril involved, whether collectible or not.'
On November 6, 1966, M.F.A. Insurance Company (hereafter referred to as 'MFA') issued its standard insurance policy on the building in the amount of $18,000 to the contractor insuring him against the risk of fire. It also contained the identical provision in the Gulf policy quoted above pertaining to the prorata of liability.
After the fire MFA paid to its insured, the contractor, $18,000 under what it called a loan agreement. See Kossmehl v. Millers Nat. Ins. Co., 238 Mo.App. 671, 185 S.W.2d 293. The contractor spent the $18,000 but has refused to rebuild the house.
MFA filed suit against Gulf, the contractor, and owners in which it requested a declaratory judgment that Gulf pay it the sum of $18,000, or in the alternative, that gulf pay its 'prorata portion of the amount of said fire loss damage.' Owners filed a cross-claim against the contractor for damages for breach of contract and asked for a lien on the insurance money collected by the contractor. Subsequent to trial, and while the case was under consideration by the court, owners filed a supplemental cross-claim against Gulf for the amount paid by them to the contractor and the expense of removing the debris following the fire. Gulf admitted the allegations of owners in their cross-claim, and also filed a cross-claim against the contractor praying to be subrogated to the rights of owners against the contractor and for judgment against the contractor in an amount equal to the sum claimed to be due owners.
By its judgment the trial court held (1) that MFA was not entitled to recover any amount from Gulf because the policies of insurance were issued to different parties and insured different interests; (2) that owners have judgment against Gulf in the amount of $17,625, the amount of their loss consisting of the amount paid by them to the contractor and the cost of removing the debris; and (3) that Gulf be subrogated to the claim of owners against the contractor and that it have judgment against the contractor in the amount of $17,625. MFA and the contractor have appealed.
MFA asserts that the trial court erred in denying it any relief against Gulf because (1) there was 'no provision in the builder's contract which placed the risk of loss by fire upon him or required him to rebuild in the event of fire,' and (2) the policy of Gulf was 'a builder's risk policy and specifically insured against loss during construction, and was prior in point of time' to MFA's policy.
The substance of the contention of MFA, as we understand, it, is that the contractor was not required to rebuild in the event of loss by fire, and therefore the contractor sustained no loss insured by MFA, or the greatest insured loss sustained was the difference between what owners had paid and what the contractor had expended on the building prior to the fire, and that in any event Gulf should pay all or part of the loss.
MFA relies primarily on Richardson v. Shaw, 1 Mo.App. 234. In that case the contractor agreed to construct a building, and the owner agreed to pay in installments as the work progressed. Before completion the building was destroyed by storm. The parties then entered into another agreement for the carpentry work upon another building to be erected in place of the first, and the new contract provided that the first contract was 'set aside and no longer binding on either of the parties' and that a payment of $1,000 previously made would 'apply on (the second) contract.' The contractor later brought suit to recover for work and materials furnished on the first building up to the time of its demolition. It was held that under the circumstances 'the (contractor's) claim upon a quantum meruit appears to have been left open, and in the course of the opinion it was said:
Although there is language in Richardson v. Shaw which supports MFA's contention, there was in fact no issue of the legal duty of the contractor to rebuild. We do not consider that case to be controlling, and insofar as it may be construed to hold that under the factual circumstances of this case the risk of loss by fire was not on the contractor, it is contrary to the weight of authority and contrary to what we consider to be the better reasoned cases.
The contract in this case was prepared by the contractor and was brief and simply stated. In substance, the contractor was to furnish all material and labor and construct a house on the owners' land for a specifically stated price. It is clear that the intention of the parties was that the obligation of the contractor was to construct a complete house; not portions thereof as separate and distinguishable items. This was true even though the owners agreed to make partial payments as the work progressed. The general rule is well stated in 'Illustration No. 4 to § 266(3) of Restatement of Contracts as follows:
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