State ex rel. Webb v. Hartford Cas. Ins. Co.

Decision Date13 May 1997
Docket NumberNo. WD,WD
Citation956 S.W.2d 272
PartiesSTATE of Missouri ex rel. Yolanda D. WEBB, Appellant, v. HARTFORD CASUALTY INSURANCE COMPANY, Respondent. 52929.
CourtMissouri Court of Appeals

Dale K. Irwin, Slough, Connealy, Irwin & Madden, Kansas City, for appellant.

Keith Witten, Sandler, Balkin, Hellman, Weinstein & Witten, Kansas City, for respondent.

Before HANNA, P.J., and ELLIS and LAURA DENVIR STITH, JJ.

ELLIS, Judge.

On or about September 8, 1994, Yolanda D. Webb agreed to purchase an automobile from Michael Smith d/b/a One Way Automotive Plaza for $5,000, which she borrowed from her credit union and paid to Smith. When Smith failed to obtain and deliver the promised car, Webb filed suit against him in the Circuit Court of Jackson County, Missouri. Count I of her petition alleged fraud, and Count II alleged a violation of the Merchandising Practices Act, § 407.020. 1 Webb's petition prayed for the return of her $5,000, the interest she incurred on her loan, and her attorney fees. Following trial, the trial court entered judgment against Smith on Count II and awarded Webb $6,996.44 in damages, pursuant to § 407.025.1. 2 These damages included the car's $5,000 purchase price, $246.44 in interest on the loan, and $1,750 in attorney fees.

As required of all used car dealers in Missouri, Smith had secured a Motor Vehicle Dealer Bond in the sum of $25,000 from Hartford naming One Way Automobile Plaza as the principal and the State of Missouri as the obligee ("the bond"). § 301.560.1(4). 3 Under the bond, Hartford agreed to indemnify:

... any person dealing or transacting business with the principal for any loss sustained by any person by reason of the acts of principal provided such acts of principal constitute grounds for suspension or revocation of Principal's registration....

In accordance with § 301.560.1(4), Webb sent a copy of the judgment against Smith to the Missouri Motor Vehicle Commission for collection under the bond. The Commission's Executive Director advised Hartford that Smith's conduct would result in the suspension or revocation of One Way Automotive's operating license pursuant to §§ 301.562.2(5) and (12), and that the claim was, therefore, payable under the bond. Hartford paid Webb the car's purchase price of $5,000, but refused to pay the interest and attorney fees.

On October 27, 1995, Webb filed suit in the Circuit Court of Jackson County, Missouri, against Hartford to recover the interest and attorney fees, as well as any additional interest, penalties and attorney fees provided for under § 375.420, Missouri's vexatious refusal statute. Both parties stipulated to the facts and moved for summary judgment. 4 The court granted summary judgment to Hartford on all issues. Webb appeals claiming she, rather than Hartford, was entitled to summary judgment as a matter of law.

Appellate review of the propriety of summary judgment is essentially de novo. ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). The record is viewed in the light most favorable to the party against whom summary judgment was entered, and that party is afforded all reasonable inferences that may be drawn from the evidence. Id. We will affirm the granting of summary judgment when no genuine issues of material fact exist and the movant has a right to judgment as a matter of law. General Motors Corp. v. Kansas City, 895 S.W.2d 59, 61 (Mo.App. W.D.1995), cert. denied, 516 U.S. 909, 116 S.Ct. 277, 133 L. Ed.2d 197 (1995). Because the case was submitted on a set of stipulated facts and no factual issues remain in dispute, we consider only whether the judgment is correct as a matter of law.

The parties asked the circuit court to determine whether, as a matter of law, Hartford was liable under the terms of the bond for the interest Webb incurred on the loan she secured to purchase the car and the attorney fees she incurred in obtaining the judgment against Smith. The court excluded these sums from the scope of the bond, stating that:

"[t]he $5,000 was clearly obtained by one or all of those means. Mr. Smith did not, however, obtain the interest Plaintiff has paid. It was paid to a lending institution by Plaintiff. Similarly, the attorney's fees are not money Mr. Smith obtained."

Webb contends the court's interpretation is erroneous in that it ignores the plain language of the bond which provides for the indemnity of "any loss sustained," and instead substitutes the words, "any money obtained by the dealer."

"General principles of surety law dictate that the liability of a surety is coextensive with that of its principal." City of Kansas City ex rel. Jennings v. Integon Indem. Corp., 857 S.W.2d 233, 236 (Mo.App. W.D.1993). Consequently, the rights and liabilities of a surety are measured by those of the principal in the absence of an agreement to the contrary. Id.

Under the terms of the bond, Hartford was obligated to indemnify Webb for any loss she sustained as a result of Smith's fraudulent acts. 5 Compensation for loss is in the form of actual damages. Haynam v. Laclede Elec. Co-op., Inc., 889 S.W.2d 148, 153 (Mo.App. S.D.1994) (quoting Chappell v. City of Springfield, 423 S.W.2d 810, 812 (Mo. banc 1968)). Therefore, Webb was entitled to recover her actual damages (losses) sustained as a natural, necessary, and logical consequence of Smith's fraudulent representation. See Parsons Constr. Co. v. Missouri Pub. Serv. Co., 425 S.W.2d 166, 173 (Mo. banc 1968). Webb maintains that the interest she incurred on her car loan and the attorney fees she incurred in suing Smith to recover her money were sustained as a direct and proximate result of Smith's fraudulent conduct. We agree.

In reliance upon Smith's representation that he would obtain and deliver a 1994 Geo Prism for $5,000, Webb obtained a loan in that amount and paid Smith in full. Smith never produced the agreed upon car and, despite repeated demands, refused to return Webb's money. The interest on the loan constituted a loss to Webb in that she was responsible for the interest even though she had use of neither the car nor the money. This loss was a natural consequence of Smith's fraudulent representation and, therefore, was recoverable under the bond. Parsons, 425 S.W.2d at 173.

Similarly, Hartford must indemnify Webb for the attorney fees she incurred in recovering her money from Smith. Each dealer is required by statute to secure a bond to indemnify "any loss " sustained as a result of an act by the dealer which constitutes grounds for suspension or revocation of its license. § 301.560.1(4). In order to collect the proceeds of the bond from the surety, the statute requires the injured party to obtain a final judgment against the dealer from a Missouri court of competent jurisdiction. § 301.560.1(4). Thus, the statute which requires the bond, and specifies what the bond must cover, contemplates that the injured party will necessarily incur attorney fees in obtaining the required judgment against the dealer. It is undisputed that Hartford issued the bond to enable Smith to comply with the provisions § 301.560.1(4). Consequently, it is clear the parties intended that attorney fees be a "loss" subject to the bond's indemnity. See Lake Ctr. Boatworks, Inc. v. Martin, 804 S.W.2d 842, 845 (Mo.App. E.D.1991); International Minerals & Chem. v. Avon Prods., 889 S.W.2d 111, 115-16 (Mo.App. E.D.1994).

Hartford nevertheless claims this case is governed by Frank A. Marcomb v. Hartford Fire Ins. Co., 934 S.W.2d 17 (Mo.App. W.D.1996). In Marcomb, suit was brought against an auto dealer for injuries sustained during the wrongful repossession of a car he had purchased. The trial court entered a default judgment against the dealer for $40,000 in actual damages, $10,382.05 in attorney fees, $800.01 in costs and expenses, and $60,000 in exemplary damages. The dealer had a Motor Vehicle Dealer Bond required by § 301.560.1(4) issued by Hartford Fire Insurance Company. Marcomb sought payment of the judgment from Hartford pursuant to the terms of the bond. 6 Because the dealer failed to convey the car's title to Marcomb and failure to convey title constitutes grounds for suspension or revocation of a dealer's license under § 301.562.2(5), Hartford paid Marcomb $1350, representing the cash payments Marcomb had made on the car ($1150) and the value of the car ($200). However, Hartford refused to pay the remainder of the damages because they were unrelated to the value of the automobile.

Marcomb sued Hartford for vexatious refusal to pay the judgment claiming that Hartford was obligated under the bond to indemnify him for all losses suffered from the repossession. The trial court concluded that Hartford was not responsible for the damages Marcomb sustained during the repossession because the acts complained of did not constitute grounds for suspending or revoking a motor vehicle dealer's license under § 301.562.2. 7 On appeal, this court affirmed, holding that Hartford was "not liable for the damages Marcomb suffered when the repossession agents hit him with the car because the statute did not make such an act a ground for license suspension or revocation." Marcomb, 934 S.W.2d at 19. It is axiomatic that if the act complained of is not a ground for license suspension or revocation under § 301.562.2, it cannot be the basis for recovery of attorney fees incurred in bringing suit. Thus, the Marcomb court properly held that Marcomb was not entitled to collect his attorney fees incurred in securing judgment for damages he sustained when the repossession agents hit him with the car.

Nevertheless, Marcomb recognized that Missouri courts generally permit recovery of attorney fees if "a statute or a contractual...

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