Stromberg v. Moore

• Decision Date: 28 June 2005
• Docket Number: No. ED 83912.,ED 83912.
• Citation: 170 S.W.3d 26
• Parties: Conrad STROMBERG, et al., Respondents/Cross-Appellants, v. Kevin J. MOORE, et al., Cross/Respondent, and State Bank of Jefferson County, Appellant, and UMB Bank, n.a., and American Family Insurance Company, Respondent.
• Court: Missouri Supreme Court

170 S.W.3d 26

Conrad STROMBERG, et al., Respondents/Cross-Appellants, v. Kevin J. MOORE, et al., Cross/Respondent, and State Bank of Jefferson County, Appellant, and UMB Bank, n.a., and American Family Insurance Company, Respondent.

No. ED 83912.

Missouri Court of Appeals, Eastern District, Division Two.

June 28, 2005.

Motion for Rehearing and/or Transfer to Supreme Court Denied August 4, 2005.

Application for Transfer Denied September 20, 2005.

Michael A. Campbell, Dawn Ann M. Johnson, St. Louis, MO, for Appellant.

Gregory D. O'Shea, St. Louis, MO, Nicholas G. Gasaway, Jr., Hillsboro, MO, for Respondent.

ROBERT G. DOWD, JR., Judge.

State Bank of Jefferson County (State Bank) appeals from the judgment awarding Conrad Stromberg (Stromberg) $80,000 in damages for negligence and conversion in connection with an $80,000 draft (Draft) issued by American Family Mutual Insurance Company (American Family) in connection with a fire insurance claim. On appeal, State Bank argues the trial court erred in granting judgment in favor of Stromberg because (1) under the election of remedies doctrine, Stromberg is precluded from claiming an interest in the Draft, (2) under Section 400.3-420, RSMo 2000,¹ liability for conversion is limited to the plaintiff's interest in the instrument, and (3) the doctrine of unavoidable consequences and the doctrine of laches prevent Stromberg from making a claim against State Bank. On cross-appeal, Stromberg argues the trial court erred in denying him damages by way of interest in its application of Section 408.040. We affirm in part and reverse and remand in part.

Viewed in the light most favorable to the judgment, the following facts were adduced at trial. Stromberg owned a plot of ground with buildings located in DeSoto, Missouri. In 1997, Stromberg sold this property to Kevin and Lucinda Moore (collectively referred to as the Moores) for a purchase price of $100,000, receiving $7,000 at closing and taking back a note and Deed of Trust for $93,000. Named as beneficiaries on the Deed of Trust were Stromberg, Mary Stromberg, his wife, Shawn Stromberg, his son, and Margaret Stromberg, his daughter (collectively referred to as the Strombergs). The note secured by the Deed of Trust was payable over twenty years with monthly payments of $807.08. Also at the closing, a policy of fire insurance in the amount of $80,000 was issued on the property naming Complete Auto Repair, the Moore's company, as the insured and Stromberg as the mortgagee.²

On June 7, 1998, the buildings on the mortgaged property were completely destroyed by fire. On June 8, 1998, American Family received a telephone proof of loss from its insured, the Moores d/b/a Complete Auto Repair. On July 13, 1998, American Family issued the Draft in the amount of $80,000 which was the total amount of coverage under its policy and made the draft payable to Complete Auto Repair and Stromberg. Kevin Moore received the draft by mail. Stromberg and the Moores met in late July or early August to discuss division of the Draft without reaching any agreement as to its division because the amount the Moores owed Stromberg on the Deed of Trust on the date of the fire was approximately $92,000.³

On August 11, 1998, Kevin Moore presented the Draft, purportedly endorsed by both payees, for deposit into his business account at State Bank. Stromberg testified he did not endorse the Draft nor did he authorize Kevin Moore or Complete Auto Repair to endorse the Draft for him.

Linda Tucker, teller for State Bank, testified relating to the deposit of the Draft by Kevin Moore. She testified that Kevin Moore came into the bank with the Draft but was not accompanied by Stromberg. Kevin Moore told Linda Tucker that Stromberg was his partner. Linda Tucker testified that she did not know Stromberg and, at the time of deposit, she did not require identification or verification that Stromberg's signature was correct and genuine. She further testified that there was a partnership resolution on file for Complete Auto Repair showing the signature of Kevin Moore but not that of Stromberg. In fact, Stromberg was never a part of the partnership resolution nor was his signature on record anywhere at State Bank.

Richard Francis, president of State Bank, testified that Stromberg was not a customer of the bank and that he would not have received any notice of account activity. Richard Francis also testified that the bank had no relationship with Stromberg nor did he know of or did the bank have a financial interest in the transaction between Stromberg and Kevin Moore. Additionally, Richard Francis testified the teller is required to know the endorser. There was no signature card on file bearing Stromberg's signature.

Handwriting expert, William Storer, testified that it was his opinion the signature of Stromberg was not genuine.

Before discovering the Draft had been deposited, Stromberg foreclosed on the mortgaged property on November 10, 1998. At the time of foreclosure, he was not aware that Kevin Moore had deposited the Draft into State Bank over the forgery of his signature. Stromberg took back the real estate at the foreclosure sale. Stromberg testified he did not know that the Draft was deposited until after the foreclosure. Stromberg was never a customer of State Bank, nor did he have access to any financial information that he could have reviewed to know of the deposit.

After discovering the Draft had been deposited without his consent, Stromberg notified State Bank sometime in November of 1998 of the forgery and later received a phone call from Richard Francis asking why the forgery had not been reported sooner. Stromberg replied that he reported the forgery as soon as he found out about it.⁴ Stromberg sent a letter to State Bank after it had been confirmed the Draft was forged. Stromberg demanded return of the Draft proceeds. State Bank, through Richard Francis, denied Stromberg's demand.

This case was presented for trial. After trial, the trial court entered a judgment granting damages for conversion in favor of Stromberg, but denying Stromberg damages by way of interest from the date of conversion. This appeal follows.

On appeal, State Bank argues the trial court erred in granting judgment in favor of Stromberg because under the election of remedies doctrine, Stromberg is precluded from claiming an interest in the Draft. Specifically, State Bank contends that because Stromberg foreclosed on the property as a means of recovering his damages, rather than pursuing a claim against State Bank on the Draft, Stromberg elected his remedy and now cannot pursue a claim for conversion against State Bank. In related points, State Bank argues that liability for conversion is limited to a plaintiff's interest in the instrument, and that the doctrine of unavoidable consequences and the doctrine of laches prevent Stromberg from making a claim against State Bank. We disagree.

In a court-tried case, the judgment of the trial court will be affirmed on appeal unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). Id. We accept all evidence and inferences favorable to the judgment, and disregard all contrary inferences. P & K Heating and Air Conditioning, Inc. v. Tusten Townhomes Redevelopment Corp., 877 S.W.2d 121, 123 (Mo.App. E.D.1994). We are bound by the trial court's factual findings if supported by substantial evidence in the record. Id.

The election of remedies doctrine, a doctrine of estoppel, originates from the theory that "where a party has the right to pursue one of two inconsistent remedies and he makes his election, institutes suit, and prosecutes it to final judgment, he cannot thereafter pursue another and inconsistent remedy." Whittom v. Alexander-Richardson Partnership, 851 S.W.2d 504, 506 (Mo. banc 1993)(quoting Tooker, et al., v. Missouri Power & Light Co., 336 Mo. 592, 80 S.W.2d 691, 695 (1935)). The purpose of the election of remedies doctrine is to prevent double redress for a single wrong. Twellman v. Lindell Trust Co., 534 S.W.2d 83, 94 (Mo.App.1976). "Where one elects to pursue one or two or more inconsistent remedies, with full knowledge of all facts, and receives full satisfaction therefrom, he can no longer assert his cause of action." Skandia America Reinsurance Corp. v. Financial Guardian Group, 857 S.W.2d 843, 846 (Mo.App. W.D.1993)(quoting U.S. Fidelity & Guaranty Co. v. Fidelity Nat. Bank & Trust Co., 232 Mo.App. 412, 109 S.W.2d 47 (1937)). To determine whether remedies are inconsistent, we look at whether one theory alleges what the other denies or whether one theory is repugnant to another. Ellsworth Breihan Bldg. Co. v. Teha Inc., 48 S.W.3d 80, 82 (Mo.App. E.D.2001).

Here, based on the record, there is no election of remedies problem. First, Stromberg did not recover full satisfaction for his losses. While Stromberg recovered his property through foreclosure at a value of $80,000, he was still deprived of the insurance proceeds because of State Bank's conversion. Second, rather than suffering a single wrong, Stromberg suffered a double wrong. The Moores defaulted on their mortgage obligations under the Deed of Trust and, in addition, State Bank negligently accepted a forged endorsement. Stromberg's theory for recovery against the Moores is not repugnant to his theory for recovery against State Bank. Therefore, as a matter of law, Stromberg's foreclosure action against the Moores is not inconsistent with his claim for conversion against State Bank. See Twellman, 534 S.W.2d at 94 (holding that remedy of purchaser of treasurer's check against person who forged the endorsement on the check and remedy against the bank which issued the check and paid it over the forged endorsement were not inconsistent); see also Davis v. Hauschild, 243 S.W.2d 956, 960 (Mo. banc 1951)(holding that claim by p...