Superintendent of Ins. of State of N.Y. v. Livestock Market Ins. Agency, Inc.
| Decision Date | 25 March 1986 |
| Docket Number | No. WD,WD |
| Citation | 709 S.W.2d 897 |
| Parties | SUPERINTENDENT OF INSURANCE OF the STATE OF NEW YORK, as Liquidator of Summit Insurance Company of New York, Appellant, v. LIVESTOCK MARKET INSURANCE AGENCY, INC., Respondent. 36215. |
| Court | Missouri Court of Appeals |
Bernard L. Balkin, Lloyd S. Hellman, Sandler, Balkin, Hellman & Weinstein, Kansas City, for appellant.
Gerard D. Eftink, Van Hooser & Olsen, Kansas City, for respondent.
Before LOWENSTEIN, P.J., SHANGLER, J., and SOMERVILLE, Senior Judge.
This is a civil action for money damages on a written contract brought by the Superintendent of Insurance of the State of New York, as Liquidator of Summit Insurance Company of New York [Summit] against Livestock Market Insurance Agency, Inc. [LMIA]. The suit was brought by the Superintendent as assignee of Associated Surety [a Summit general agent] of its right of indemnity under a subagency contract with LMIA. The issue to the trial court, and on this appeal, is whether that provision of indemnity amounts to a promise to pay. If so, the ten-year statute of limitations in § 516.110, RSMo 1978, appertains. If not, the five-year statute of limitations in § 516.120, RSMo, appertains. The case was tried to the court, and judgment was rendered against the plaintiff Superintendent on the determination that § 516.120 appertains, and the action was barred by limitations.
Associated Surety Agents, Inc. was a general agent for Summit. A term of the agreement of general agency exposed Associated Surety to liability to Summit for underwriting losses in excess of the premiums generated by Associated Surety. The liability was calculated under a formula which allocated credits for premiums and debits for bond payouts. Associated Surety was liable, by that term of agreement, to pay to Summit the excess of debits over credits. The arrangement was designated a retrospective profit-commission agreement.
On September 1, 1972, Associated Surety designated LMIA as its subagent under a written agreement. Paragraph eight provided:
The Agent [LMIA] will indemnify the Company [Associated Surety] and save it harmless from any and all liability, loss cost, damage, claim suits, attorney's fees and expense of any kind and nature which it may sustain or incur as a result of, or in connection with the execution of any bonds written by the Agent.
LMIA was an insurance agency. In its relationship with Associated Surety, the practice was for LMIA to submit proposals for bonds with Associated Surety. Associated Surety, then, placed the bonds with a surety--in this case, Summit.
On February 9, 1974, as authorized by the subagency agreement with Associated Surety, LMIA issued a $70,000 bond with Smith County Livestock Exchange, Inc., of Tyler, Texas [Smith County] as principal, and Summit as surety. On July 26, 1974 LMIA notified Summit by letter of a potential claim by one, Tindel, under the bond for failure of Smith County to pay for cattle delivered to the insured. Tindel then brought suit in a Texas court to recover the claim. The LMIA financial statement of its 1974 Annual Report established an indemnity reserve and noted, particularly, that
[a]n additional amount of $40,000 of the reserve funds has been set aside in a trust fund to provide for loss on a defaulted bond.
The only LMIA bond in default extant when the statement issued was the bond to Smith County. Tindel recovered judgment on the claim in Texas and, after investigation, on January 8, 1975, LMIA general manager Heimke wrote to Summit to request that a check in the amount of $36,832.27 issue to Tindel and his attorney in settlement of the judgment. Summit, on January 14, 1975, made payment as requested, and thereupon--under the retrospective profit-commission term of the general agency agreement--made claim against Associated Surety for reimbursement of the $36,832.27 paid to Tindel. Summit held letters of credit as security for any Associated Surety liability to Summit under the general agency agreement.
In 1975, Associated Surety filed suit in Hamilton County, Indiana, to enjoin the bank from payment to Summit on the Associated Surety letters of credit deposited with Summit. Summit intervened and counterclaimed against Associated Surety. The counterclaim asserted that under the retrospective profit commission provision of the general agency agreement, the losses exceeded the premiums, and so Associated Surety was indebted to Summit for the difference. Included in that accounting was the specific claim paid by Summit to Tindel under the bond written by LMIA.
In May of 1981, the Indiana court rendered judgment for $1,073,180.70 against Associated Surety and in favor of the Superintendent of Insurance of the State of New York as Liquidator of Summit [an insolvency which, apparently, intervened between commencement of suit and judgment]. The Superintendent as Liquidator, concurrently with that rendition, entered into a covenant with Associated Surety not to execute the judgment upon conditions that Associated Surety pay to the Liquidator the $100,000 letters of credit fund, and assigned to the Liquidator the Associated Surety right of indemnity against LMIA [under the subagency agreement] for losses on bonds written by LMIA, and included in the Indiana judgment. The Liquidator as assignee made demand upon LMIA, and thereafter, the Superintendent as Liquidator brought suit in this state to enforce its claim of indemnity against LMIA under the assignment from Associated Surety. The trial court denied the claim, and that is the judgment under review.
The judgment entered by the circuit court found as fact that Associated Surety assigned to the Liquidator the LMIA promise to indemnify Associate Security for any loss issued by Summit to Smith County. The court concluded as a matter of law, nevertheless, that the cause of action brought by the Liquidator as assignee of promise of indemnity was for breach of contract and not to enforce a promise to pay money. The court determined, therefore, that the five-year limitations period of § 516.120, rather than the ten-year limitations period of § 516.110, applied. The court concluded, also, as a matter of law that the cause of action in suit accrued in 1975 when Summit Insurance Company paid the Tindel claim on the Smith County surety bond, and therefore the petition to enforce the claim brought in 1982 was barred by limitations.
The Liquidator argues on appeal that the LMIA written promise to make indemnity was a promise for the payment of money under § 516.110, and hence governed by the ten-year statute of limitations. He argues alternatively and in any event that the cause of action to recover indemnity did not accrue, for purposes of limitations, until the indemnities suffered loss--that is, until a determination that the indemnity is liable to a third party. On that formulation of principle [the Liquidator argues], the cause of action for indemnity against LMIA accrued in 1981, when the Indiana court adjudicated the Associated Surety liability under the retrospective profit-commission term of the general agency agreement with Summit.
The cause of action the Liquidator pleads against LMIA is to enforce a promise of indemnity: the LMIA promise to Associated Surety to save it harmless against "liability or loss cost ... in connection with the execution of any bonds written by the Agent [LMIA]." An action upon a contract must be commenced within five years [§ 516.120] unless that action is upon a contract in writing for the payment of money--in which event it must be commenced within ten years [§ 516.110]. 1 The question, then, is whether the LMIA written promise to Associated Surety is for the payment of money.
It is the evolved principle of our decisions that, in order for the ten-year limitations period of § 516.110 to appertain, the writing must be not only for the payment of money, but also must contain a "promise to pay money...." [emphasis added] Martin v. Potashnick, 358 Mo. 833, 217 S.W.2d 379 at 381 (1949). Once that obligation is found from the writing, the exact amount to be paid or other detail of the obligation may be shown by extrinsic evidence--but not the promise itself. Id. "[T]he essence of a promise to pay money is that it is an acknowledgement of an indebtedness, an admission of a debt due and unpaid." Id. [emphasis added] That rationale yields the concomitant: "[t]he promise may not be shown by extrinsic evidence or consist of an obligation imposed by law from the facts of the transaction." Id. [emphasis added] Thus, although in Potashnick, there was a writing--an open account--that some indebtedness existed, that the debt was due and payable was determinable only by extrinsic evidence, and hence the contract was not a promise to pay money within § 516.110. This rule and cognate maxims have been given repeated and emphatic effect by our decisions.
Thus, in Sam Kraus Co. v. State Highway Commission, 416 S.W.2d 639 (Mo.1967), the supreme court rejected the assertion of the contractor that the highway commission warranty in writing that "no damage would result to any property" from work done in accordance with the specifications was a promise for the payment of money under § 516.110 so as to entitle the contractor to sue the commission within ten years for money paid to a third party whose property was damaged as a result of the work. The court held that the petition "did not seek payment of any sum [the Commission] agreed to pay in the contract," but was only a suit for breach of contract. "[A]n action for breach of contract," the court concluded, "is not an action upon a writing for the payment of money within that ten-year statute and is accordingly governed by the five-year statute." Id. at 641. In McIntyre v. Kansas City, 237 Mo.App. 1178, 171 S.W.2d...
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