Shebester v. Triple Crown Insurers
| Decision Date | 11 February 1992 |
| Docket Number | No. 74087,74087 |
| Citation | 1992 OK 20,826 P.2d 603 |
| Parties | 17 UCC Rep.Serv.2d 295, 1992 OK 20 Ralph W. SHEBESTER, d/b/a Shebester Stallion Station, Plaintiff-Appellant, v. TRIPLE CROWN INSURERS, a Florida insurance corporation, Defendant-Appellee, and Quality Insurance Company, d/b/a Quality Property and Casualty Insurance Company, Defendant. |
| Court | Oklahoma Supreme Court |
Alan Agee and Brett Agee, Garvin, Agee, & Meisel, Pauls Valley, for plaintiff-appellant.
Murray E. Abowitz and Rita J. Dingus, Murray, Abowitz and Welch, Oklahoma City, for defendant-appellee.
The United States Court of Appeals for the Tenth Circuit certified the following question pursuant to the Uniform Certification of Questions of Law Act, 20 O.S.1981 §§ 1601 et seq.:
"Does a seller of property state a cause of action in tort against an agent of an insurance company where the seller alleges that:
1. The seller sold the property to a purchaser on credit terms under an agreement that required the purchaser to have in force an insurance policy on the property with the seller named as a beneficiary, to the extent of the unpaid balance of the purchase price;
2. The purchaser purchased insurance coverage, but failed to purchase the required coverage for the seller, thus the insurance policy did not include the seller as a beneficiary;
3. The property was destroyed and the insurance proceeds were paid to the purchaser;
4. Prior to payment of the proceeds to the beneficiary (the purchaser), the agent for the insurance company was informed by the seller that the sales agreement required that the seller be named as a beneficiary of the insurance policy and that the purchaser's debt to the seller had not been satisfied?"
The circuit court invites our attention to some authorities in other states and requests that we search for an appropriate Oklahoma-law norm 1--ex contractu, ex delicto, or otherwise--which governs the duty of an insurer's agent toward persons who claim insurance proceeds based on a contract with the insured, collateral to the policy, of which the agent acquires knowledge before the proceeds' payout is effected. 2
We answer the certified question in the negative and hold that under the facts of this case no actionable tortious invasion may be pressed either under Article 9 of Oklahoma's Uniform Commercial Code [U.C.C.] 3
3 or under this state's common law. We also answer another question which we view as fairly comprised within that which is posed, though perhaps not explicitly propounded to us. The seller may be entitled to recover against the agent, if the latter acted for an undisclosed principal insurer, (1) as third-party beneficiary of the buyer's insurance contract or (2) for wrongful payout in breach of the insurer's quasi-contractual duty to deliver proceeds to one whose claim should prevail. We defer to the circuit court's panel for a decision as to whether, on the record in this case, the applicable standards of federal appellate review allow the seller to invoke either of the two ex contractu theories of recovery. 4
An installment contract for the purchase of a horse, which led to this litigation, provides that the buyer will purchase insurance for the seller's benefit to the extent of the outstanding debt. The buyer insured the horse, but it named itself as the policy's beneficiary. After the horse died but before payout of the proceeds to the buyer, the seller made demand on the insurer's agent for his share of the proceeds. The seller furnished the agent with copies of (1) his installment-purchase agreement with the buyer and (2) a letter from the buyer's managing partner, which directed the company to pay the seller the amount outstanding on the contract. 5 Several months later the insurer's agent paid all of the proceeds directly to the buyer.
The seller sued the buyer, the insurer's agent, and the insurer 6 in the United States District Court for the Western District of Oklahoma. The district court gave the seller a judgment against the buyer for $25,000.00 7 and summary judgment went in favor of the agent. 8
The seller, who appealed, claims that the agreement to insure the horse for his benefit entitles him to recovery against the insurer's agent. Although he frankly admits he cannot identify precisely the applicable theory of liability, he asserts that when faced with similar facts, some jurisdictions have recognized an insurer's duty to prevent wrongful payout of proceeds. 9
THE SELLER'S TORT THEORIES
The seller claims he has a security interest in the collateral and that the insurer's agent converted the policy proceeds within the meaning of 12A O.S.Supp.1984 § 9-306(2). 10 The insurer's agent responds that the installment-purchase agreement did not even create a security interest. Article 9 of the U.C.C. governs in this state all security interests in personal property. 11 A written security agreement describing the collateral and signed by the debtor is the sine qua non of a nonpossessory security interest in goods. 12 In short, although the agreement before us is in writing and signed by the buyer, it lacks language showing an intent to secure the collateral. 13 This fundamental flaw precludes the seller from invoking § 9-306(2) to sue for conversion of the proceeds.
The seller, who admits that under extant Oklahoma jurisprudence these facts do not give rise to a common-law tort, theorizes his action should be maintainable as one for conversion, quasi-conversion, or a "yet unnamed" tort.
Conversion is an illegal taking of another's personalty inconsistent with his ownership rights. 14 The general rule in Oklahoma is that only tangible personal property may be converted. 15 An action for conversion would not lie. What the seller has here is the right to recover money, a chose in action, which under Oklahoma law is considered intangible personal property. 16 The agent's wrongful payment to another neither extinguishes the seller's claim nor affects the superior claimant's title to the proceeds. We accordingly hold that the seller's claim for wrongful payout is not maintainable as common-law conversion.
The seller relies extensively on several sections of Couch on Insurance 2d to support his "yet unnamed" tort theory. 17 We have considered this instructive text and the authority cited in its support but remain unpersuaded that a new tort should be fashioned to hold an insurer's agent liable ex delicto for failure to pay proceeds to the proper claimant. 18
THE SELLER'S CONTRACTUAL REMEDIES AGAINST THE INSURER'S AGENT
The circuit court asks that we answer whether an insurer's agent would have individual liability for the wrongfully paid-out proceeds. 19 The seller contends that in making the payment of proceeds, the agent was acting for the insurer who was an undisclosed principal. 20 When liability for an ex contractu breach is sought to be imposed upon an agent, a familiar common-law principle must govern. One who deals as an agent in behalf of a disclosed principal is not liable for the latter's ex contractu breach. 21 The doctrine's rationale is that an agreement made with a known agent for a disclosed principal is a contract with the principal alone. The very same rule applies to insurance contracts. 22
Assuming the agent acted for the insurer as an undisclosed principal, we identify today two theories, both under the contract rubric 23--that of third-party-beneficiary as well as that of quasi-contractual duty to pay the rightful claimant--both of which might be available in support of the seller's claim. 24 An action is one ex contractu when recovery is sought for breach of (a) an express promise, (b) a promise implied in fact or (c) a promise implied in law. 25 A third-party beneficiary contract is based upon a promise implied in fact while, as we will more fully explain, a quasi-contractual duty to pay the rightful claimant arises from a promise implied in law.
The seller contends that even if he has no cause of action in tort, the agent is nonetheless liable to him for the undisclosed principal insurer's breach of contract. A contract made expressly for a third person's benefit is enforceable by that person. 26 He need not be a party to nor be named in the contract to occupy a third-party beneficiary status. 27 Assuming that, on this record, the seller meets the procedural and evidentiary standards to place the agent in the position of one who was acting for an undisclosed principal and also to place itself in a third-party beneficiary status under the buyer's policy, the applicable norm of Oklahoma law would give the seller standing to enforce the policy against the agent, qua obligor.
The following principles of an insurer's liability for wrongful payout are generally accepted: (1) an insurer who chooses to pay one of two or more competing claimants does so at its own risk; and (2) payment to the named beneficiary with notice of another person's adverse claim renders an insurer liable to the legally entitled claimant for the amount wrongfully paid. 28 National jurisprudence applying these rules is indeed scarce. It yields no clear clue to the rationale for imposing this form of liability that bears the unmistakable earmarks of a quasi-contractual obligation. 29
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