Brittany Hunter v. Charles Moore, Sr. ( 2015 )

0000000
In the Missouri Court of Appeals
Eastern District
DIVISION FOUR
BRITTANY HUNTER, . ) No. ED101338
)
Respondent, ) Appeal from the Circuit Court
) of City of St. Louis
vs. )
)
CHARLES MOORE, SR., ) Honorable David L. Dowd
)
Appellant. )
) FILED: April 14, 2015
Charles Moore, Sr. ("Appellant") appeals from the trial court's judgment ordering
reformation and specific performance under an agreement pursuant to Section 537.065, RSMo
(2000), which allows a claimant and tortfeasor to contract to limit recovery to specified assets or
an insurance contract. The reformed agreement required Appellant to agree to a consent
judgment or to have an uncontested hearing on liability and damages to prohibit American
Family Mutual Insurance Company ("American Family") from controlling the defense in a
pending personal injury case brought by Brittany Hunter ("Respondent") against Appellant. We
reverse and remand.
I. Background
On March 27, 2012, Respondent brought suit in Franklin County against the Delta Motel
and others, including Appellant, seeking recovery as a result of being raped and sexually
assaulted at the Delta Motel. Appellant was the motel manager at the time of the assault, and
Respondent generally alleged negligence and other wrongful conduct by Appellant and others
that caused or contributed to her sexual assault.
American Family insured the Delta Motel and was tasked to provide a defense and
indemnity of Respondent's lawsuit for both the motel and Appellant. American Family filed a
Second Amended Petition for Declaratory Judgment on April 5, 2012, and added Appellant as a
defendant in this action. American Family then sent Appellant a reservation of rights letter
notifying him it would defend him in the Franklin County action, but that it would not indemnify
him against any judgment due to two exclusions in his policy.1 Appellant then hired Patrick
Horsefield ("Horsefield") in April 2012, and a month later Horsefield sent American Family a
letter on behalf of Appellant informing it that Appellant refused and rejected American Family's
defense in the Franklin County litigation and requesting that American Family withdraw its
reservation of rights and dismiss Appellant from the declaratory judgment action.
American Family sent Appellant a letter on June 1, 2012, stating that it was withdrawing
its limited defense and reservation of rights and agreeing to dismiss Appellant from the
declaratory judgment action. Appellant, however, was not dismissed from the declaratory
judgment action prior to American Family subsequently filing a motion for summary judgment
requesting judgment be entered in its favor, finding that "no coverage exists" for Appellant. In a
letter dated September 4, 2012, Horsefield informed American Family that Appellant had entered
into a settlement agreement (the "537 Agreement") with Respondent. After having filed its
motion for summary judgment, American Family received this letter and finally dismissed
1
American Family's two cited exclusions were the "expected or intended injury" and the "Abuse or Molestation
Exclusion."
2
Appellant, albeit without prejudice, from the declaratory judgment action on September 10,
2012.
The 537 Agreement provides that at the time of the alleged negligence at the Delta Motel,
Appellant was insured under a policy issued by American Family, and that Respondent would
only seek satisfaction under the policy, unless Appellant's income exceeded $50,000 in any
calendar year. The agreement also provided that Appellant was obligated to authorize and
empower Respondent's counsel, James O'Leary, to pursue all claims against American Family,
that Appellant would cooperate in those claims, and that any proceeds from those claims would
be divided equally among Appellant and Respondent, unless the 50% Appellant recovered
exceeded the amount necessary to satisfy any judgment in the underlying lawsuit.
One key point of contention between the parties is whether the following paragraph was
included in the agreement:
The parties further agree that in the event of a global settlement of all claims,
including the underlying litigation and the claims for bad faith failure to settle,
bad faith failure to defend and indemnify, and any other claim filed by Moore
against American Family, plaintiff shall receive full compensation, plus interests
and costs awarded plaintiff, set forth in any underlying judgment in the lawsuit
before the parties split the proceeds from any settlement, verdict or judgment
against American Family pursuant to the terms of paragraph 2 herein.
O'Leary's original proposed agreement included this paragraph, but Horsefield testified that he
deleted this paragraph from the version he recommended to Appellant and had Appellant sign.
O'Leary testified that he "may have" taken Appellant's signature from the revised version of the
537 Agreement Horsefield sent him and attached it to his version of the agreement.
The second key point of contention between the parties is whether or not the 537
Agreement required Appellant to concede liability or submit to a non-contested trial. Horsefield
testified that he believed and intended there would still be a trial on liability and damages, while
3
O'Leary testified that he certainly intended for Appellant to submit to a non-contested trial and
not cross-examine Respondent's liability and damage experts. O'Leary did admit that the 537
Agreement "doesn't specifically say" that there will be an uncontested hearing on liability and
damages in Franklin County in the underlying case.
Ultimately the trial court entered judgment in favor of Respondent, reforming the 537
Agreement by removing the paragraph quoted above and adding two provisions. The added
provisions required Appellant to not allow American Family to have control over the defense of
the underlying liability case, and required Appellant to cooperate with Respondent in that case,
either by agreeing to a consent judgment or by having an uncontested hearing on liability and
damages. This appeal follows.
II. Discussion
Appellant lists only one point relied on in his brief, although within that point, several
issues are raised.2 The first point we will address is Appellant's contention that the trial court
erred in ordering specific performance of the 537 Agreement and in reforming its terms because
no valid agreement existed. Appellant argues that because American Family had withdrawn its
reservation of rights letter and was no longer unjustifiably refusing to defend him in the Franklin
County case, the 537 Agreement was not valid and enforceable.
Appellant also contends the trial court erred in enforcing and reforming the 537
Agreement because Respondent failed to prove by clear and convincing evidence that the parties
intended to include the added terms, or that they were absent due to mutual mistake.
Standard of Review
2
We would like to remind Appellant that using multifarious points in briefing to this court is improper. "Improper
points relied on, including multifarious points, preserve nothing for appellate review. However, we may review a
multifarious point ex gratia, and we choose to do so here." Barnett v. Rogers, 400 S.W.3d 38, 47 (Mo. App. S.D.
2013) (internal quotations omitted).
4
We will affirm the trial court's judgment enforcing and reforming the 537 Agreement
unless it lacks substantial evidence to support it, it is against the weight of the evidence, or it
erroneously declares or applies the law. Schmitz v. Great Am. Assurance Co., 337 S.W.3d 700,
705 (Mo. banc 2011) (citing Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976)). "Because
specific performance is an equitable remedy, we will afford the trial court great deference in
granting [an action] to enforce settlement." St. Louis Union Station Holdings, Inc. v. Discovery
Channel Store, 301 S.W.3d 549, 551 (Mo. App. E.D. 2009).
Validity of the 537 Agreement
Section 537.065 of the Revised Missouri Statutes allows for a claimant and tortfeasor to
contract to limit recovery to specified assets or an insurance contract. "Where one is bound to
protect another from liability, he is bound by the result of the litigation to which such other is a
party, provided he had opportunity to control and manage it." Schmitz, 337 S.W.3d at 710,
quoting Drennen v. Wren, 416 S.W.2d 229, 234-35 (Mo. App. 1967) (internal quotations
omitted). So our standard is whether American Family "had the opportunity to control and
manage the litigation, not whether [it] had the duty to control and manage the litigation."
Schmitz, 337 S.W.3d at 710.
If an insurer unjustifiably refuses to defend or provide coverage, the insured may enter an
agreement with the plaintiff to limit its liability to the insured's policy. Id. "[The insurer] cannot
have its cake and eat it too by both refusing coverage and at the same time continuing to control
the terms of settlement in defense of an action it had refused to defend." Id.
When, as here, the insured (Appellant) refuses to accept the insurer's (American Family's)
defense under a reservation of rights, "the insurer has three options: '(1) it may represent the
insured without a reservation of rights; (2) it may withdraw from representing the insured
5
altogether; or (3) it may file a declaratory judgment action to determine the scope of [the]
policy's coverage.'" Auto-Owners Ins. Co. v. Ennulat, 231 S.W.3d 297, 305 (Mo. App. E.D.
2007) (quoting Truck Ins. Exch. V. Prairie Framing, LLC, 162 S.W.3d 64, 88 (Mo. App. W.D.
2005)). Choosing option three, as American Family did here, is a "risky" decision "because it is
treated as a refusal to defend the insured, and, if unjustified, the insurer is treated as if it waived
any control of the defense and rights to participate in the underlying tort action." Id.
Here, American Family filed a motion for summary judgment against Appellant in the
declaratory judgment action on August 20, 2012. American Family had promised to dismiss
Appellant from the declaratory judgment action, but had not done so by the time it filed its
motion for summary judgment. At this point Appellant and Horsefield negotiated and agreed to
the 537 Agreement at issue, notifying American Family of the agreement in a letter dated
September 4, 2012. Only after the fact did American Family finally dismiss Appellant from the
declaratory judgment action as promised, and even then it dismissed Appellant without
prejudice, leaving open the possibility of re-filing the claim against Appellant down the road.
There is substantial evidence in the record to support the trial court's finding that, at the
time the parties entered into the 537 Agreement, American Family was unjustifiably refusing to
defend Appellant in the underlying action, and thus Appellant was free to enter into the 537
Agreement. This point is denied.
Reformation of the 537 Agreement
Appellant's second issue alleges that the trial court erred in reforming and enforcing the
537 Agreement because Appellant did not agree to the added terms and they were not absent
from the agreement due to mutual mistake.
6
The party seeking reformation must prove by clear, cogent and convincing evidence that
the instrument fails to reflect the underlying agreement between the parties due to fraud, mutual
mistake or other grounds satisfying the requirements for equitable relief. Brennan v. Missouri
State Emp's Ret. Sys., 734 S.W.2d 230, 232 (Mo. App. W.D. 1987). "For reformation on
grounds of mistake, the primary factual issues to be established are the existence of a prior
agreement and mutual mistake." Everhart v. Westmoreland, 898 S.W.2d 634, 637 (Mo. App.
W.D. 1995). "The party seeking reformation need not show agreement on any particular words
or language but must only show agreement to accomplish a particular object," and the mistake
must be mutual and common to both parties. Id. The writing must fail to set forth the intended
terms of the agreement and fail to incorporate the parties' true intentions. Id.
There is no dispute that the 537 Agreement that Respondent seeks to enforce does not
contain any language which required Appellant to agree to a consent judgment or to submit to an
uncontested hearing on liability and damages. Appellant was required to "cooperate" in pursuit
of claims against American Family and give Respondent her fair share of any proceeds, but
nowhere in the 537 Agreement is Appellant required to prohibit American Family from
defending him or to submit to a consent judgment or uncontested hearing. The trial court found
that Respondent showed by clear, cogent, and convincing evidence that the paragraph quoted
above, regarding Respondent receiving compensation and fees before any split of proceeds, was
not meant to be included in the agreement, that the parties mutually agreed to not allow
American Family to defend Appellant in the underlying case, and that Appellant would either
agree to a consent judgment or submit to an uncontested hearing on liability and damages. We
do not believe Respondent met her burden in justifying reformation of the 537 Agreement.
7
"'[A] mutual mistake occurs when both parties, at the time of contracting, share a
misconception about a basic assumption or vital fact upon which they based their bargain.'" Alea
London ltd. V. Bono-Soltysiak Enter.'s, 186 S.W.3d 403, 415 (Mo. App. E.D. 2006) (quoting 27
Williston on Contracts, 4th ed., Section 70:107, p. 536). In other words, reformation is proper
only when the instrument reflects what neither party intended. Galemore v. Haley, 471 S.W.2d
518, 524 (Mo. App. 1971). This is not the case here. O'Leary testified that it was his
understanding that he and Horsefield had agreed in their negotiations to prohibit American
Family from defending Appellant and to have Appellant submit to a consent judgment or
uncontested hearing on liability and damages. However, Horsefield testified that this was not his
understanding of their discussions, and none of the emails the two sent each other mention these
provisions.3 Further, Appellant and Horsefield testified that it was never their intention to submit
to a consent judgment or an uncontested hearing on liability and damages, and Appellant made
clear he did not want to pay Respondent anything.
Also, O'Leary claimed that the very nature of an agreement under Section 537.065, was
that Appellant would confess judgment:
It's a 537.065. By the spirit of the statute and the case law that interprets that, it's
an understanding that they absolutely have no right to control it. That's one of the
benefits to the injured victim to enter into these type[s] of arrangements. When
there's been an improper denial of defense or DJ action. That’s why the statute's
there.
Contrary to O'Leary's testimony, an agreement under Section 537.065 does not require either
party to agree to a consent judgment or admit liability. The Supreme Court of Missouri makes
this clear during its fact recitation in Schmitz: "CPB and the parents agreed that if a judgment
3
Horsefield did send a letter to Gene Hou and John Sanner of American Family on September 4, 2012, in which
Horsefield mentioned that Appellant no longer trusted Sanner or American Family and wanted him to withdraw
from the Franklin County case. However, the letter also mentions the 537 Agreement, and there is no indication that
this desire to have Sanner withdraw as counsel was contained in or stemmed from the 537 Agreement itself.
8
was entered against CPB, the parents would limit any recovery to the insurance policies. There
was no agreement concerning CPB's liability or the damages. Instead, those matters would be
submitted to the trial court." 337 S.W.3d at 704. This is directly analogous to the fact scenario
present here – the parties agreed to limit any potential recovery to an insurance policy, but did
not make any agreement as to liability or damages. Therefore, O'Leary was mistaken in his
testimony that it was "understood" that there would be an uncontested hearing. We find that
there was no mutual mistake in putting the parties' agreement into writing, and thus the trial court
granting reformation of the agreement was improper and against the weight of the evidence.
Appellant's point is granted.
III. Conclusion
We reverse and remand to the trial court for further proceedings consistent with this
opinion.
___________________________________
ROY L. RICHTER, Judge
Patricia L. Cohen, P.J., concurs
Robert M. Clayton III, J., concurs
9