TWIN CITY FEDERAL SAV. & L. ASS'N v. Transamerica Ins. Co.

• Decision Date: 14 February 1974
• Docket Number: No. 73-1367.,73-1367.
• Citation: 491 F.2d 1122
• Parties: TWIN CITY FEDERAL SAVINGS & LOAN ASSOCIATION, Appellee, v. TRANSAMERICA INSURANCE COMPANY, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

491 F.2d 1122 (1974)

TWIN CITY FEDERAL SAVINGS & LOAN ASSOCIATION, Appellee, v. TRANSAMERICA INSURANCE COMPANY, Appellant.

No. 73-1367.

United States Court of Appeals, Eighth Circuit.

Submitted November 13, 1973.

Decided February 14, 1974.

Robert S. McKenzie, Kansas City, Mo., for appellant.

Keith Witten, Kansas City, Mo., for appellee.

Before MEHAFFY, Chief Judge, WEBSTER, Circuit Judge, and HARPER, Senior District Judge.^*

MEHAFFY, Chief Judge.

This is a diversity action involving Missouri law brought by plaintiff Twin City Federal Savings & Loan Association against defendant Transamerica Insurance Company under a savings and loan blanket bond. The paramount issues involve: (1) the applicability of the election of remedies defense; (2) the propriety of a district court entering judgment on the basis of a statement of questions of law submitted by the parties. The district court found the election of remedies defense inapplicable and entered judgment for plaintiff on the basis of a submission by the parties of a statement of questions of law. For reasons hereinafter set forth we affirm the district court as to the inapplicability of the election of remedies defense but vacate and remand as to the judgment entered for the plaintiff on the basis of the court's conclusions of law and findings of fact.

Because of the complexity of this case a more extensive discussion of the facts is set forth which will make for a better understanding of the issues involved.

Twin City Federal Savings & Loan Association (hereinafter "Twin City") is a federally chartered savings and loan association that was insured under a blanket savings and loan bond issued by a predecessor company of Transamerica Insurance Company (both companies hereinafter referred to as "Transamerica"). Twin City advanced construction loan moneys to Investment Corporation of Missouri in 1961 taking as security liens on eight lots. Later that year after both the maker and assignor of the notes became insolvent, Twin City learned that there were prior liens on the eight lots. These prior liens were subsequently foreclosed and the subject loans made by Twin City totaling $61,120.25 never repaid.

Prior to the loans being made, Investment Corporation of Missouri submitted mortgagee interim title insurance binders to Twin City which had been issued by American Title Insurance Company (hereinafter "American Title"). When the subsequent payouts were requested, Investment Corporation of Missouri submitted disbursement memoranda to Twin City which also appeared to have been issued by American Title. Neither the title insurance binders dated December 29, 1960, nor the disbursement memoranda dated February 2, 1961, disclosed the prior existing liens. The binders were signed by Dan Hayes who had been a registered agent of American Title since April 29, 1959. The disbursement memoranda purported to update the title binders and were also signed by Dan Hayes but in a different manner in that it was not clear whether he signed as a validating officer of American Title or as an officer of Title Facilities, Inc. Title Facilities, Inc. is a title company incorporated by Dan Hayes and two others on January 18, 1961, and was at no time authorized to serve as an agent of American Title. On February 13, 1961 American Title mailed a letter of cancellation of Hayes' license to the Insurance Commission of Missouri which became effective on the Commission's records on February 15, 1961.

Twin City mailed notice of probable loss under the savings and loan blanket bond to Transamerica on March 27, 1962 and a statement of loss totaling $170,610.25^* on July 16, 1962. By letter dated March 14, 1963 Transamerica responded by letter to Twin City's attorneys advising that in its view there was no coverage under the bond and, even if there were, United Pacific, as well as American Title, should precede them.

On September 11, 1962 Twin City filed an action against American Title by a complaint containing two counts. The first sought recovery for breach of the title insurance contract. The second count sounded in tort alleging negligence on the part of American Title in examining the title to the subject eight lots. On October 16, 1963, in response to Twin City's request for admissions, American Title raised the question of Dan Hayes' authority as a validating officer at the time the disbursement memoranda were executed. Twin City amended its complaint on November 15, 1963 by adding a third count which alleged that Dan Hayes was clothed with actual and apparent authority from American Title when he fraudulently misrepresented to Twin City that the eight lots were free of encumbrances. Consequently, American Title amended its answer to each of the three counts on November 26, 1963 by asserting that Twin City knew or should have known that the disbursement memoranda were not prepared by authorized agents of American Title. The parties entered into a compromise settlement with Twin City receiving $32,500.00 and the action was dismissed by order filed December 31, 1963.

On February 7, 1963 Twin City instituted a suit against United Pacific Insurance Company under a fiscal agent's bond which was settled on April 28, 1965 for $60,000.00. Of this amount $15,540.00 was allocated to the losses on the loans secured by the eight lots.

Twin City then initiated this action by complaint filed April 20, 1966 seeking recovery from Transamerica under its savings and loan blanket bond for its total losses less the applicable amounts received from American Title and United Pacific. The complaint was accompanied by Twin City's demand for a jury trial. The parties stipulated to certain facts and filed cross motions for partial summary judgment on the issue of coverage under the fraud and dishonesty insuring clause. The bond excludes from the fraud and dishonesty insuring clause any losses resulting from the nonpayment of loans. The trial court granted partial summary judgment in favor of Transamerica and Twin City appealed. The judgment was affirmed by this court on July 25, 1969 and is reported at 413 F.2d 494. Twin City continued with the action claiming a right of recovery on the basis of forgery. Transamerica raised the defense of election of remedies and the parties submitted this issue to the court on stipulation pursuant to Rule 42(b) of the Federal Rules of Civil Procedure. By memorandum and order filed April 23, 1971 the district court held that the doctrine of election of remedies was not applicable to the stipulated circumstances of this case and ordered pretrial proceedings to resume. The parties entered into further stipulations of uncontroverted facts and waiver of objections to admissibility of exhibits on the ground of lack of identification and submitted issues of law to the district court on June 23, 1971 on the basis of stipulated facts. On December 29, 1972 the district court made several findings of fact and conclusions of law and judgment was entered for Twin City in the amount of $40,226.84. Twin City's motion to increase the judgment by $2,592.93 for additional interest was granted. Transamerica's motion for a new trial was denied and appeal then made to this court.

Transamerica's arguments fall into two categories: (1) that the district court erred in ruling that Twin City had not made an election of remedies in bringing and recovering in two prior suits; and (2) that the court erred in its findings of fact, conclusions of law and disposition of the case on the basis of the issues submitted to it by stipulation.

I

The doctrine of election of remedies has long been recognized in Missouri law and is defined as follows:

"Election is simply what the term imports—a choice shown by an overt act between two or more inconsistent rights, either of which may be asserted at the will of the chooser alone.

* * * The doctrine is applicable where an aggrieved party has two remedies by which he may enforce inconsistent rights growing out of the same transaction and, being cognizant of his legal rights and of such facts as will enable him to make an intelligent choice, brings his action by one of the methods. Under such circumstances, the law says he shall not thereafter adopt the alternate remedy, for a suitor cannot pursue a remedy which predicates his case upon one theory of right and thereafter seek a remedy inconsistent with such prior proceeding." 18 Am.Jur., Election of Remedies, § 3, pp. 129, 130.

Berger v. Mercantile Trust Co., 352 S.W.2d 644, 647 (Mo.1961).

The purpose of the doctrine of election of remedies is not to prevent recourse to any...