Weems v. American Sec. Ins. Co.

• Decision Date: 12 March 1986
• Docket Number: No. 55845,55845
• Citation: 486 So.2d 1222
• Parties: Margaret C. WEEMS v. AMERICAN SECURITY INSURANCE COMPANY.
• Court: Mississippi Supreme Court

Page 1222

486 So.2d 1222

Margaret C. WEEMS v. AMERICAN SECURITY INSURANCE COMPANY.

No. 55845.

Supreme Court of Mississippi.

March 12, 1986.

William J. Johnson, Clinton, for appellant.

R.E. Parker, Jr., Gail S. Akin, Varner, Parker & Sessums, Vicksburg, for appellee.

Before PATTERSON, C.J., and PRATHER and ROBERTSON, JJ.

ROBERTSON, Justice, for the Court:

I.

Today marks the second appearance of this case before this Court. In Weems v. American Security Insurance Co., 450 So.2d 431 (Miss.1984) (Weems I ) we held that Mrs. Margaret C. Weems, holder of a third deed of trust on a piece of residential property which has been destroyed by fire, was entitled to recover under the mortgagee clause of a fire insurance policy. Gilding the lily, Mrs. Weems now seeks to resurrect her already finally dismissed charges that the insurer denied her claim in bad faith for which she once demanded an assessment of punitive damages.

For the reasons explained below, we are of the view that Mrs. Weems' bad faith/punitive damages claim was finally dismissed in Weems I. Such claims have but one life. On a more modest point, we have concluded that the trial judge shortchanged Mrs. Weems by almost two years worth of interest on the mortgage debt. To this limited extent, we reverse and render.

II.

On December 14, 1981, John C. Barlow contracted with American Security Insurance Company for fire insurance on his home in the amount of $245,000. ¹ The policy contained a standard mortgagee clause in favor of Mrs Margaret C. Weems, his ex-mother-in-law and the holder of a $30,000 note from Barlow secured by a third deed of trust on the home.

On March 16, 1982, three months after the issuance of the policy, the insured's premises were totally destroyed by fire. As mortgagee, Mrs. Weems made a claim on the policy. American Security denied the claim, asserting that there had been a change of condition or increase of hazard and that Mrs. Weems had failed to notify the insurance company thereof. Specifically, American Security invoked the language of the policy, as mandated by Miss. Code Ann. Sec. 83-13-9 (1972) which provides:

The mortgagee (or trustee) shall notify this company of any change of ownership or occupancy or increase of hazard which shall come to the knowledge of said mortgagee (or trustee) and, unless permitted by this policy, it shall be noted thereon and the mortgagee (or trustee) shall, on demand, pay the premium for such increased hazard for the term of the use thereof; otherwise this policy shall be null and void.

In Weems I we held that this defense failed on the uncontradicted facts. We directed the entry of judgment in favor of Mrs. Weems and against American Security on the underlying insurance contract claim.

Not surprisingly, Mrs. Weems on remand filed a motion for summary judgment on the contract claim. In support Mrs. Weems filed the following:

(1) This Court's opinion in Weems I.

(2) This Court's mandate in Weems I.

(3) Her own affidavit attesting to the following facts:

(a) John N. and Sandra W. Barlow executed a deed of trust to secure the repayment of $30,000 together with interest at the rate of ten (10) percent per annum from the date of April 7, 1980. [The land deed of trust was filed together with the affidavit.]

(b) The indebtedness, as evidenced by the land deed of trust, has been reduced to judgment in the United States District Court for the Southern District of Mississippi, Western Division, in Barlow v. American Security Insurance Company, Cause Nos. W82-0101(c), W82-0113(c), W82-0114(c). [Order of U.S.Dist.Ct., So.Dist. included as Ex. "E", R. 22]

(c) That since the rendition of the above judgment, Barlow had made five payments totaling $200.

(4) An affidavit by John Barlow attesting to the following:

(a) That he executed a land deed of trust on April 7, 1980, securing an indebtedness of $30,000 together with interest thereon at the rate of ten (10) percent per annum.

(b) That American Security Insurance Company issued an insurance policy, No. 4310282, in the sum of $245,000 covering the residence located on the land described in the deed of trust. And that on March 26, 1982, the residence was completely destroyed by fire.

(c) That the indebtedness to Mrs. Margaret Weems has since been reduced to a judgment entered in the cause aforecited in Mrs. Weems' affidavit and that he has reduced said judgment by $200.

On July 11, 1984, the trial judge granted Mrs. Weems' motion and entered summary judgment in her favor against American Security in the amount of $30,000 plus interest of ten (10) percent per annum from and after March 30, 1982, plus costs.

On July 23, 1984, Mrs. Weems filed a motion to alter or amend the partial summary judgment entered in her favor, suggesting that interest on the $30,000 principal amount should run from and after April 7, 1980, being the date on which the note and the insured deed of trust had been executed, and not from March 30, 1982. This motion was denied.

Contemporaneously therewith, American Security had filed a cross-motion for summary judgment in which it sought final dismissal of Mrs. Weems' bad faith refusal claim--as though such were necessary to extinguish any phoenix-like capacity of that claim to arise from the ashes of Mrs. Weems' first trial. In any event, this cross-motion was sustained and an order was entered to that effect dated July 27, 1984.

On August 6, 1984, Mrs. Weems filed a motion to vacate the partial summary judgment order granted American Security on the issue of punitive damages. That motion was also denied.

This appeal has been initiated by Mrs. Margaret C. Weems who assigns as error that

(1) The trial court erred in granting American Security Insurance Company's motion for summary judgment on the issue of punitive damages.

(2) The trial court erred in refusing to award interest to plaintiff prior to March 30, 1982.

The Appellee, American Security Insurance Company, in turn has cross-appealed and assigned as error the following, to-wit:

The trial court erred in awarding judgment to Mrs. Weems on the principal sum of $30,000 plus interest at the rate of ten (10) percent per annum from March 30, 1982.

III.

In her first assignment of error on direct appeal, Mrs. Weems argues that the trial court erred in sustaining American Security's motion for partial summary judgment in which her claim for punitive damages--at least on the face of the trial court's order--was finally dismissed.

The claim at issue has its origin in Mrs. Weems' original complaint filed June 18, 1982. There she charged American Security with bad faith refusal to pay her claim as an insured mortgagee and demanded an assessment of $500,000 in punitive damages. At trial in Weems I American Security requested and was granted a peremptory instruction in its favor on the punitive damages issue. The final judgment in Weems I entered January 20, 1983, finally dismissed all of Mrs. Weems claims, obviously including the claim for punitive damages.

The appeal in Weems I is significant. We have reviewed Mrs. Weems' assignment of errors filed July 1, 1983, as well as the briefs of the parties. Mrs. Weems in no way challenges the trial judge's dismissal of her bad faith/punitive damages claim. The subject is never mentioned. Certainly, nothing in the opinion released in Weems I on May 2, 1984, disturbs so much of the trial court judgment as dismissed the punitive damages claim.

As a general rule, when this Court reverses and remands for a new trial, the case is to be tried de novo on all issues. Miller v. Watson, 467 So.2d 672, 674 (Miss.1985); Clark v. Clark, 203 Miss. 28, 33 So.2d 293 (Miss.1948). The trial de novo in this instance certainly includes the issue of Mrs. Weems' contract damages even though in Weems I she did not assign as error the failure of the final judgment to award such.

There is an obvious exception to this general rule. Where the judgment on the issue not assigned is one which can rationally co-exist with the appellate reversal on the issue which is assigned as error, the judgment on the issue not assigned ordinarily remains final. Cf. Statham v. Blaine, 234 Miss. 649, 670, 108 So.2d 213 (1959). Within this exception is Mrs. Weems bad faith/punitive damages claim which we regard as a claim separate and independent of her claim on the insurance contract. The reason why Mrs. Weems' bad faith claim lies within the exception is that it proceeds on a theory of liability factually and legally distinct from her contract claim. This becomes apparent when it is remembered that a bad faith refusal claim is an "independent tort", State Farm Fire and Casualty Co. v. Simpson, 477 So.2d 242, 250 (Miss.1985); Standard Life Insurance Company of Indiana v. Veal, 354 So.2d 239, 247 (Miss.1977).

Because we perceive there has been some confusion on the point, we wish to make it clear that the substantive rule breach of which may subject a party to an assessment of punitive damages is the same in bad faith refusal cases as in any others. Compare State Farm Fire and Casualty Co. v. Simpson, 477 So.2d 242, 248-49 (Miss.1985); Reserve Life Insurance Company v. McGee, 444 So.2d 803, 808-09 (Miss.1983); Standard Life Insurance Company of Indiana v. Veal, 354 So.2d 239, 247 (Miss.1977) with Gardner v. Jones, 464 So.2d 1144, 1148-49 (Miss.1985); Snowden v. Osborn, 269 So.2d 858, 860-61 (Miss.1972); T.G. Blackwell Co. v. Eshee, 261 So.2d 481, 485 (Miss.1972); Seals v. St. Regis Paper Co., 236 So.2d 388, 392 (Miss.1970).

From all of these cases we identify two somewhat distinct types of circumstances wherein one's conduct may subject him to punitive damages: where the defendant acted with malice and where the defendant acted with gross negligence or reckless disregard for the rights of others. See Restatement (Second) of Torts Sec. 908(2) (1979).

For today's purposes, the point is that the bad faith/punitive damages claim is one separable in law and in fact from the...