Morris v. Reed

CourtCourt of Appeal of Missouri (US)
Citation510 S.W.2d 234
PartiesGene F. MORRIS, Plaintiff-Respondent, v. G. Findlay REED and G. Findlay Reed, Inc., Defendants. and The Home Insurance Company, Defendant-Appellant. Gene F. MORRIS, Plaintiff-Appellant, v. G. Findlay REED and G. Findlay Reed, Inc., Defendants, The Home Insurance Company, Defendant-Pespondent. Nos KCD 26178, 26179.
Decision Date06 May 1974

Kenneth O. Smith, Stephen D. Manz, Lowell L. Knipmeyer, Kansas City, for defendant-appellant Home Ins. Co.

Michael J. Albano, Graham, Paden, Welch & Martin, Independence, for plaintiff-respondent Gene F. Morris.



In the court below plaintiff received a directed verdict in the sum of $74,000.00 on an insurance policy plus interest thereon, but the court declined to impose penalties against the insurer for vexatious delay. The defendant insurance company appeals from the award of damages, while plaintiff cross-appeals from the denial of statutory penalties.

The events giving rise to the present controversy occurred in December, 1966. Until the latter part of that month, Jay Appleson owned and operated the Buckingham Hotal. He became delinquent on a note secured by second mortgage on that property, and the note holder, Mark Southard, commenced foreclosure proceedings.

While those proceedings were pending, plaintiff purchased Southard's note on about December 10. Thereafter and sometime prior to December 25, plaintiff telephoned the offices of G. Findlay Reed, Inc., an insurance agency which was a general agent for defendant Home Insurance Company. Plaintiff's call was for the purpose of verifying that Home had insurance coverage covering Appleson's interest in the Buckingham Hotel. Reed, the president of the company and the one who took this call, responded that he would have to check the file since this was an account being handled by another man in the office, who was out of town. Reed did check the file and verified to plaintiff that Home had the coverage mentioned. Plaintiff advised Reed at that time that he had a second mortgage on the property and was going to foreclose.

Soon thereafter, the foreclosure was consummated and plaintiff got a trustee's deed on December 29. Just prior to or after the foreclosure sale, plaintiff called Reed for a second time and told him that he should be the named insured on the policy. In response to that request, Reed stated, 'All right, I'll take care of it.'

Nothing was done about this insurance matter at the Reed Agency until December 29, when Gordon Naughton, who handled this account, returned to Kansas City. Naughton made a call the following day to the home of the first mortgage holder, Mrs. Colgrove, who was the one who actually produced this insurance business for the Reed Agency, to ascertain that she knew about the change of ownership of the hotel and that a change in the insurance was agreeable to her. An affirmative answer was forthcoming, but Naughton did nothing further at that time.

On Friday, December 31, a fire occurred at the Buckingham Hotel, with extensive damage. The police and fire departments, on the basis of their inspections, concluded that the fire was of an incendiary origin.

On the next business day, January 3, 1967, Naughton proceeded to prepare two documents. One was a form of consent to be executed by Appleson, which Naughton mailed that day to Appleson. The second document was a notice of loss to Home Insurance Company, which Naughton made out showing plaintiff as the insured. This notice of loss was prepared in accordance with what Naughton testified was his intention to cover plaintiff effective from December 27, 1966, which he understood to be the date of plaintiff's second telephone conversation with Reed.

Defendant Home then launched a thorough investigation, one result of which was to obtain a detailed estimate of loss showing that the cost of repair to the building would be approximately $144,000. Another element of the investigation was the taking of a written statement from Reed in which he reported to the company that he had engaged in the telephone conversations with plaintiff described above. As a result of the investigation so made, the attorney representing the insurance company wrote a denial of liability to the plaintiff on April 27, 1967, in which the denial was placed on the sole ground 'that there was no oral or written binder or oral or written contract of insurance on the date of the captioned fire with the Home Insurance Company and on that date your interest, if any, in the Buckingham Hotel was not insured by it.'

Shortly after that denial of liability, plaintiff solicited some sort of settlement from the insurance company, and in the course of those negotiations, Home's lawyer stated the opinion that the Reed Agency was legally liable for not having taken the necessary and proper steps to effect insurance. Finally a settlement was reached under which plaintiff executed a complete release for $9,918.97, plus an assignment to him of the first mortgage note which the insurer had receiver when it made payment to Mrs. Colgrove. The release agreement specifically reserved to plaintiff all rights of action against the Reed Agency. The insurance company's pleased surprise at this favorable settlement was evidenced by a comment on notations in the home office file, 'Still cannot believe or understand why Morris would let us off hook so cheaply.'

Pursuant to the reservation of right set forth in the settlement with Home, plaintiff filed suit against G. Findlay Reed and G. Findlay Reed, Inc., on the theory that those defendants had failed in their agreement to obtain effective insurance on the Buckingham Hotel. After more than two years of pendency, that suit was amended to add Home as an additional party defendant.

At the close of the plaintiff's case, defendants Reed and Reed, Inc., moved for a directed verdict and those motions were granted. At the close of all the evidence, both plaintiff and defendant Home filed their respective motions for directed verdict. The motion of plaintiff was granted, and that of defendant Home was denied. The parties then agreed that the court might rule on the issue of vexatious delay without intervention of a jury; and with respect to that issue, the court declined to impose vexatious delay penalties.

On this appeal, Home argues first that the court should not have directed a verdict for the plaintiff because there were factual issues which should have been submitted to the jury. Its other principal point is that it should have received a directed verdict in its own favor, because of the release which had been executed by plaintiff in 1967.

On the part of plaintiff, his cross-appeal complains that the trial court committed an abuse of discretion by not granting vexatious delay penalties.


Before dealing with the contentions on the merits, the pending motions on procedural points call for disposition. The first of these motions is that of plaintiff to dismiss Home's brief as appellant on the ground that it fails to set forth a fair statement of facts as required by Rule 84 .04(c), V.A.M.R. Subsequent to the filing of this motion, Home was granted permission to correct its brief and pursuant to that permission Home has submitted a substitute brief. The substitute brief does comply with Rule 84.04(c), and this motion by plaintiff is therefore overruled.

The next procedural point raised by motion is the request by plaintiff to strike points I, II and IV of Home's brief as appellant on the ground that these points were not adequately preserved in the trial court. A review of the record shows that these points were adequately preserved by after trial motions, and the request to dismiss these points in therefore overruled.

Plaintiff's next point raised by motion asks for dismissal of five points in Home's reply brief on the ground that these points attempt to reargue matters covered in Home's principal brief, in violation of Rule 84.04(g). Although Home has retained the same captions to identify subject headings in both its principal and reply brief, the substance of the reply brief itself consists of perfectly proper rebuttal material, except in one single respect. That exception relates to Home's attempt to interject in its reply brief for the first time a new theory of defense. This new argument challenges the sufficiency of plaintiff's proof of its right to recover on the ground that the policy contained an 80% coinsurance clause and plaintiff failed to introduce evidence showing that the amount of coverage was in fact at least 80% of the loss suffered.

This new argument cannot properly be considered. No new theory may be interjected for the first time by way of a reply brief. Baker v. St. Paul Fire & Marine Insurance Co., 427 S.W.2d 281, 294 (Mo.App.1968); Denney v. Spot Martin, Inc., 328 S.W.2d 399, 405 (Mo.App.1959); Arnold v. Brotherhood of Locomotive Firemen, 232 Mo.App. 325, 106 S.W.2d 32, 36 (1937). While this rule of law precludes consideration of this new point, the temptation is irresistible to point out that this claim of failure to insure to at least 80% (which would be a matter of underinsurance), is utterly inconsistent with Home's charge in another connection that plaintiff overinsured the property. See footnote 1 under Point II, B, of this opinion

Plaintiff's motion last mentioned is sustained insofar as it pertains to the matter of alleged violation of the coinsurance clause. In all other respects, it is overruled.


Coming now to Home's contentions on the merits, its position rests upon the foundation that plaintiff had the burden of proof on showing his right to recover and especially to show some basis for setting aside the release dated May 3, 1967. Home correctly points out that it is only in very unusual cases that a court may properly direct a...

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