Young v. Ray America, Inc.

• Decision Date: 22 May 1984
• Docket Number: No. WD,WD
• Parties: Shawn YOUNG, A Minor, Plaintiff-Appellant, v. RAY AMERICA, INC., Defendant-Respondent, and St. Paul Fire and Marine Insurance Co., Garnishee-Respondent. 34412.
• Court: Missouri Court of Appeals

Page 74

673 S.W.2d 74

Shawn YOUNG, A Minor, Plaintiff-Appellant, v. RAY AMERICA, INC., Defendant-Respondent, and St. Paul Fire and Marine Insurance Co., Garnishee-Respondent.

No. WD 34412.

Missouri Court of Appeals,

Western District.

May 22, 1984.

Gary W. Collins, Kansas City, for plaintiff-appellant.

Robert M. Hill, Richmond, for defendant-respondent.

Dean F. Arnold, Kansas City, for garnishee-respondent.

Before SOMERVILLE, P.J., and NUGENT, and LOWENSTEIN, JJ.

NUGENT, Judge.

Plaintiff, Shawn Young, recovered a $45,000 judgment against defendant, Ray America, Inc., for injuries sustained while playing at a house being built by defendant. St. Paul Fire and Marine Insurance Company (hereinafter St. Paul) was summoned as garnishee and denied issuance of any policy insuring Ray America, Inc. Plaintiff contended in his reply that the policy issued by garnishee naming Dennis and Marjorie Klatt, d/b/a Klatt R.E., Inc., as named insured, also insured Ray America, Inc. The court heard the case without a jury, discharged the garnishee, and plaintiff appeals.

Pursuant to Rule 90.13(e) and § 525.190, ¹ the issue or issues to be tried in a garnishment proceeding are only those raised in the denial (the exceptions) and the reply (the response). In this proceeding, the only issue raised by plaintiff's denial and garnishee's reply was whether or not the policy issued by garnishee St. Paul, insured Ray America, Inc., the defendant in the underlying action. Where, however, issues not raised in the pleadings are nonetheless tried without objection, they are treated as though they had been raised by the pleadings. Travelers Indemnity Co. v. Beaty, 523 S.W.2d 534, 537 (Mo.App.1975); Rule 55.33(b). Thus, we review the evidence adduced at the hearing concerning plaintiff's recovery based on a prior oral agreement as well as recovery based on the written contract.

On October 7, 1975, plaintiff was hurt while playing on the foundation of a house being built in a real estate development known as Green Vale Addition. The property was owned by Ray America, Inc., which is a Missouri corporation whose only owners, directors and officers are Dennis and Marjorie Klatt. Plaintiff filed suit, however, only against Ray America, Inc. Plaintiff recovered a $45,000 judgment against Ray America, Inc., and attempted to recover said judgment amount by summoning St. Paul as garnishee.

At the garnishment proceeding, Mrs. Klatt's testimony revealed the following: Dennis and Marjorie Klatt, have been involved in the real estate business since 1968. From 1968 to 1973, the Klatt's real estate business was known as Dennis Klatt Real Estate. In 1972, the Klatts incorporated Dennis Klatt Real Estate and it became Dennis Klatt Real Estate, Inc. The primary purpose of this corporation was the selling of real estate for others. Dennis Klatt Real Estate, Inc., owned no property; it only leased office quarters. Also in 1972, the Klatts incorporated defendant Ray America, Inc. The primary purpose of Ray America was to hold property which was going to be sold or developed. The Klatts also owned fifty percent of Potmar, Limited, a small corporation they formed together with a friend to buy and sell real estate. The Klatts carried most of their liability insurance with Cameron Mutual Insurance Company until the summer of 1974, when Cameron Mutual informed the Klatts that it did not want to "be on the risk for the corporations, or for as large of a development operation as we [the Klatts] had hoped it would be."

Thereafter, Charles Allen, an insurance sales employee of the Morrison Realty--Insurance Agency of Cameron, Missouri, came to the Klatt's office and "made an appointment to come back within a week or two to take an application." At that meeting, Mr. and Mrs. Klatt discussed their insurance needs with Mr. Allen. Mrs. Klatt testified that the purpose of the meeting was "[t]o make sure that every piece of property that we'd be involved with was covered with the kind of insurance that we wanted." Mrs. Klatt told Mr. Allen that the Klatts were changing insurance companies "[b]ecause of the corporations and development." Mrs. Klatt gave Mr. Allen descriptions of the Klatt's property and also told Mr. Allen that some of the property was owned by Ray America, Inc., and some was owned by the Klatts individually. She also told Mr. Allen that houses were being built in the development owned by Ray America and showed him the Klatts' various companies' ledgers and journals. With the help of ledgers, plat books and wall maps, she gave Mr. Allen the legal descriptions of the properties sought to be insured. Mr. Allen took notes during the meeting, but he gave the Klatts no application, nor did the Klatts sign anything. Mrs. Klatt had the "understanding that insurance coverage was in effect" when Mr. Allen left.

After this meeting, the Morrison Agency prepared and submitted an application for insurance to St. Paul. The August 9, 1974, application is signed by Jerry Baker, owner of the Morrison Agency, but neither of the Klatts signed it, filled out any part of it or received a copy of it. The application lists the name of the applicant as "Dennis and Margaret Klatt DBA Klatt Realty." Various properties owned or leased by the Klatts or their corporations are listed under the "Description of Hazards" portion of the application. No indication of ownership of the various properties appears in the application. Five questions follow the property listings. The first question is, "Does applicant contemplate any structural alterations, new construction or demolition?" Neither this question nor any of the other four has a check in the provided "yes" or "no" boxes.

Garnishee, St. Paul, issued its policy and mailed it to the Klatts. It named the insured as "Dennis and Margaret Klatt DBA Klatt Realty." The declaration page of the policy was completed to show "The Named Insured is [X] Individual." The property on which the plaintiff was hurt is included in the policy schedule under the description "40 acres at Sec. 10, TWP 52, R. 29." The policy includes a form captioned "OWNERS LANDLORDS AND TENANTS LIABILITY COVERAGE FORM--COVERAGE FOR DESIGNATED PREMISES AND RELATED OPERATIONS IN PROGRESS OTHER THAN STRUCTURAL ALTERATIONS, NEW CONSTRUCTION AND DEMOLITION." After receiving and reading the policy, the Klatts asked that the named insured be changed to read "Dennis and Marjorie Klatt DBA Klatt Real Estate, Inc." No other changes were requested or made. This policy remained in force for the period of August 8, 1974, to August 8, 1975. A substantially identical policy was issued for the ensuing year and was in force when plaintiff was injured.

Jeff Crump, a St. Paul employee, was the only other person to testify. He testified that the Morrison Agency was a general agent of St. Paul. Their agency agreement includes the following provision:

Agent has full power and authority to receive and accept proposals for insurance covering such classes of risks as the Company may from time to time authorize to be insured and by such receipt and acceptance bind said Insurance Company upon the respective risk, subject to underwriting rules and requirements of the Company as may be stated from time to time.

Prior to the garnishment proceeding, the parties stipulated, among other things, that the plaintiff was injured on a portion of the land described in the policy and that plaintiff's accident was the type of occurrence covered by the policy. The parties further stipulated that the only issue in dispute was "whether or not the policy insures the individual and/or corporation liable for said accident."

Neither party requested findings of facts, but the trial judge asked the attorneys to supply the court with proposed findings of fact. The record does not indicate whether anyone complied with the court's request.

The court entered judgment in favor of the garnishee and found the following facts:

1. Garnishee issued OCT policy 580-JE-5999 covering Dennis and Marjorie Klatt.

2. Said policy was in full force and effect on the date that plaintiff fell.

3. The contract declared Klatts' business to be "Klatt Realty Company" but did not declare that the Klatts were engaged in real estate development activities.

4. The premium that the Klatts paid on the policy for a coverage of agricultural land was $0.064 per acre.

5. Had the land been classified as housing development the Klatts would have had to pay $4.32 per acre.

6. Ray America, Inc. was not named on said policy.

7. Mr and Mrs Klatt had no insurable interest in the property in question.

Those findings relate only to plaintiff's theory of recovery based on the insurance policy. The court apparently made no findings with respect to plaintiff's theory of recovery based on the prior oral agreement. In Graves v. Stewart, 642 S.W.2d 649 (Mo.1982) (en banc), the court announced the rule that findings of fact and conclusions of law by the trial court in a jury-waived case provide a proper basis for assignment of error even when the parties made no request for them. Where the trial court makes no findings of fact with respect to a particular issue, however, the court of appeals will resolve all fact issues in accordance with the court's judgment and will affirm it if it can be supported on any theory of law in accordance with the evidence. Rule 73.01(a)(2).

In his first point on appeal, plaintiff contends that the general agent bound St. Paul to an oral contract of insurance because the oral negotiations between agent and the Klatts established a binding oral contract that provided coverage for Ray America, Inc. That is not so because even if we assume that the agent had the authority to bind St. Paul and assume that an oral contract providing insurance coverage for Ray America was entered into when Charles Allen and the Klatts conducted their second meeting, that oral contract was superseded and merged into the written insurance policy at...