Mcclain v. Carpio

• Decision Date: 31 March 2011
• Docket Number: Nos. SD 30595,SD 30760.,s. SD 30595
• Citation: 338 S.W.3d 361
• Parties: Jerry Jacob McCLAIN, by and through his Mother and Next Friend, Lori RUTLEDGE, Dr. Allen Northern, and Rolla Medical Group and Women's Clinic, Inc., Plaintiffs and Relators–Appellants,v.Constantine CARPIO, M.D., Soung Kwoun, M.D., Newton Neufeld, D.O., Carl Doerhoff, Victor Lovell, M.D., and Physician Defense Association, Defendants,andMary James, Defendant Ad Litem for the Estate of Charles A. James, M.D., Lloyd Downard, John Linde, M.D., John Schwent, M.D., James Cesar, D.O., Kap Chung, M.D., Ralph Cooper, M.D., Alan Doerhoff, M.D., Carter Fenton, D.O., James Flanary, D.O., Adeluolag G. Lipede, M.D., and Benny Thomas, D.O., Defendants–Respondents.
• Court: Missouri Court of Appeals

338 S.W.3d 361

Jerry Jacob McCLAIN, by and through his Mother and Next Friend, Lori RUTLEDGE, Dr. Allen Northern, and Rolla Medical Group and Women's Clinic, Inc., Plaintiffs and Relators–Appellants,

v.Constantine CARPIO, M.D., Soung Kwoun, M.D., Newton Neufeld, D.O., Carl Doerhoff, Victor Lovell, M.D., and Physician Defense Association, Defendants,andMary James, Defendant Ad Litem for the Estate of Charles A. James, M.D., Lloyd Downard, John Linde, M.D., John Schwent, M.D., James Cesar, D.O., Kap Chung, M.D., Ralph Cooper, M.D., Alan Doerhoff, M.D., Carter Fenton, D.O., James Flanary, D.O., Adeluolag G. Lipede, M.D., and Benny Thomas, D.O., Defendants–Respondents.

Nos. SD 30595

SD 30760.

Missouri Court of Appeals, Southern District, Division One.

March 31, 2011.

Matthew J. Padberg and Anna E. Haber, The Padberg & Corrigan Law Firm, St. Louis, MO, for Appellants.Jonathan Lloyd Downard, Hansen, Stierberger, Downard, Melenbrink & Schroeder, L.L.C., Union, MO, and Steven P. Kuenzel, Eckelkamp & Kuenzel, L.L.P., Washington, MO, for Respondents James, Linde, Schwent, Downard, Fenton, Lipede, and Thomas.Dale C. Doerhoff and Heidi Doerhoff Vollet, Cook, Vetter, Doerhoff & Landwehr, P.C., Jefferson City, MO, for Respondents Cesar, Chung, Flanary, and A. Doerhoff.Karl W. Blanchard, Jr., Joplin, MO, for Respondent Cooper.Dana Lee Frese, Jefferson City, MO, for Defendant Physicians Defense Association.GARY W. LYNCH, Judge.

Jerry Jacob McClain, by and through his mother and next friend, Lori Rutledge; Dr. Allen Northern; and Rolla Medical Group and Women's Clinic, Inc. (collectively “Plaintiffs”) appeal the trial court's summary judgment in favor of James Flanary, James Cesar, Kap Chung, Alan Doerhoff, Carter Fenton, Adeluolag Lipede, Benny Thomas, John Linde, John Schwent, Ralph Cooper, Lloyd Downard, and Mary James, defendant ad litem for the Estate of Charles James (collectively “Defendants”). That judgment was entered based upon the trial court's conclusion that all of Plaintiffs' claims against Defendants were barred by the statute of limitations. Finding that conclusion erroneous, we reverse and remand for further proceedings.

Factual and Procedural Background

On April 7, 1986, the Director of the Missouri Division of Insurance, by authority granted in Chapter 383, RSMo, issued a Certificate of Authority to Physicians Defense Association (“PDA”) to engage as a corporation, in accordance with its Articles of Association, in the business of malpractice insurance in the State of Missouri. The next day, PDA filed its Articles of Association with the Missouri Secretary of State. PDA's purpose was to provide professional liability insurance or indemnification for persons licensed under the provisions of Chapter 334, RSMo, and corporations formed for the practice of medicine under Chapters 351 and 356, RSMo. PDA was an assessment mutual insurance company in which members paid an assessment upon membership and agreed to pay additional assessments as necessary for coverage of liability. Its board of directors, however, never made any special assessments against any policyholders or members. It had no shareholders.

On January 1, 1995, plaintiffs Allen Northern and Rolla Medical Group and Women's Clinic (“Insureds”) purchased a professional liability insurance policy (“the Policy”) from PDA covering the period January 1, 1995, to December 31, 1997, which provided coverage in the amounts of $200,000.00 per person and $600,000.00 per occurrence for “claims made.”

During that coverage period, on January 2, 1997, McClain filed a medical malpractice claim in Phelps County Circuit Court against Insureds and others based on their negligence during his delivery and birth on May 2, 1995.

Also during the first part of 1997, PDA's board of directors decided to discontinue business and endorsed another insurance carrier to replace outstanding policies of liability insurance. All business activity of PDA associated with new business and underwriting was discontinued effective July 1, 1997. A special meeting of the PDA members was held on August 12, 1997, at which the members voted to dissolve PDA. The membership also accepted the resignation of the board of directors and approved the appointment of Lloyd Downard and Charles James to continue as officers and trustees of PDA to complete all acts necessary for its dissolution. Also on that date, PDA's membership and board of directors approved payment to Lloyd Downard and Charles James in the sum of $168,000.00 each.

Between August 25, 1997, and September 29, 1997, PDA distributed to some defendants the following: $2,058.00 to Flanary; $1,029.00 to Cesar; $965.00 to Chung; $8,724.00 to A. Doerhoff; $3,601.00 to Fenton; $19,046.00 to Lipede; $3,073.00 to Thomas; $6,120.00 to Linde; and $10,309.00 to Schwent.

McClain's malpractice case that was pending in Phelps County was dismissed without prejudice in June 1999 and then re-filed in that same county on August 16, 1999 (“the malpractice action”).

Judgment was entered in the malpractice action on August 10, 2000, in favor of McClain and against Insureds in the amount of $14,425,916.00. This judgment also found that a section 537.065 settlement agreement entered into between McClain and Insureds on March 27, 2000, was made in good faith and was reasonable.

Around September 18, 2000, McClain and Insureds filed a declaratory judgment action against PDA seeking a determination that the Policy covered the malpractice action judgment against Insureds (“the declaratory judgment action”).

On or about December 1, 2000, PDA distributed to some defendants the following: $100.00 to Flanary; $125.00 to Cesar; $525.00 to Chung; $2,150.00 to A. Doerhoff; $275.00 to Fenton; $575.00 to Lipede; $725.00 to Thomas; $4,900.00 to Linde; and $2,225.00 to Schwent.

PDA filed Articles of Dissolution and Articles of Termination with the Missouri Secretary of State on January 29, 2001. Such articles stated that “all debts, obligations and liabilities of the corporation have been paid and discharged, or adequate provision has been made therefore.” Contrary to such statement, PDA had not made adequate provision to discharge its liabilities. On that same day, the Missouri Secretary of State issued a Certificate of Termination of PDA certifying that the corporate existence of PDA ceased as of that date.

PDA published notice of dissolution and notice to file claims pursuant to section 351.482(3), RSMo (previously section 351.565, RSMo) in the Jefferson City Tribune on February 9, 2001, and in Missouri Lawyers Weekly on February 12, 2001.

By letter dated February 12, 2001, counsel for McClain provided notice to PDA of his claims and the judgment in the malpractice action against Insureds. The letter also advised of the pending declaratory judgment action.

Judgment was entered in the declaratory judgment action on October 23, 2001, in favor of McClain and Insureds and against PDA, finding that the Policy provided coverage for the judgment in the malpractice action. The judgment in the declaratory judgment action was affirmed by this Court. See Northern v. Physicians Def. Ass'n, 88 S.W.3d 130 (Mo.App.2002). An application for transfer was denied by the Supreme Court of Missouri on November 26, 2002.

Defendants Flanary, Cesar, Chung, A. Doerhoff, Fenton, Lipede, Thomas, Linde, and Schwent were all members of PDA in 1997. Defendants Flanary, Cesar, Chung, Cooper, and A. Doerhoff were never officers or directors of PDA. Defendants Fenton, Lipede, and Thomas were not officers of PDA at the time the Policy was sold to Insureds. Defendant Linde, beginning in 1992, and defendant Schwent, beginning in 1996, served on PDA's board of directors until all members of the board resigned on August 12, 1997.

Defendant Downard was never a member of PDA. He was appointed as PDA's secretary-treasurer on February 27, 1996, and elected to the board of directors by PDA's membership on May 13, 1996. He served as a director until all members of the board resigned on August 12, 1997.

Defendant James was not a medical doctor and was never a member of PDA. He served on PDA's board of directors beginning with its incorporation in 1986 and served as PDA's president from 1987 to 2000.

Plaintiffs filed their original petition in this action on March 17, 2003, against James and thirty-five unknown and unnamed directors of PDA, seeking recovery for alleged fraudulent transfers made by James, as president of PDA, in 1997 to PDA's directors. Downard was apparently added as a defendant with the filing of Plaintiff's first Amended Petition, which, according to the docket sheet, was filed on February 23, 2004, with service of process upon him on March 25, 2004.¹

Almost two years later, on February 6, 2006,² Plaintiffs filed their Second Amended Petition, naming as defendants, in addition to James ³ and Downard, the other respondents in this appeal: Flanary; Cesar; Chung; A. Doerhoff; Fenton; Lipede; Thomas; Linde; Schwent; and Cooper, along with Constantino Carpio; Soung Kwoun; Newton Neufeld; Rex Carter; Carl Doerhoff; and Victor Lovell.⁴ Plaintiffs' Second Amended Petition sought recovery for alleged fraudulent transfers made in 1997 by James, Downard, Linde, and Schwent, as statutory trustees of PDA, to the other named defendants.

Following Plaintiffs' filing of their Third Amended Petition on March 6, 2007, alleging eight different counts (counts 1 and 3–8 against all defendants, and count 2 against James, Downard, and PDA's last board of directors), those defendants who had entered their appearance and answered this petition filed individual motions for summary judgment on all counts. While these motions for summary judgment were pending, Plaintiffs sought and were granted leave by the trial court to file their Fourth Amended Petition. The parties agreed and stipulated to the trial court that all pending motions for summary judgment were applicable to the Fourth Amended Petition.

The...