586 S.W.3d 789
Mo. Ct. App.2019Background
- In 2007 the Heckadons bought cars from Chad Franklin/CFS under a "Drive for Life" program; they later sued for MMPA violations and obtained a judgment (including punitive damages and fees).
- Franklin sued insurer Universal for bad-faith denial of coverage; that suit settled for $900,000 (allocated to a bank lien, counsel fees, and Tiffany Franklin). The Heckadons received none of those settlement funds.
- The Heckadons sued Universal and Franklin (equitable garnishment, declaratory relief, fraudulent transfer, MMPA, conspiracy, tortious interference, etc.) seeking indemnity for their original MMPA judgment and recovery of bad-faith settlement proceeds.
- At bench trial the court found the Universal policy ambiguous and entered an equitable-garnishment judgment against Universal for the MMPA award; the court later granted Universal summary judgment on claims concerning distribution of the bad-faith settlement.
- Franklin’s pleadings were struck as a discovery sanction; jury trial on damages resulted in a large award against Franklin, later reduced by the trial court to account for an attorney-fee lien; the appellate court reverses/affirms different parts and orders remand for further proceedings.
Issues
| Issue | Plaintiff's Argument (Heckadon) | Defendant's Argument (Universal/Franklin) | Held |
|---|---|---|---|
| Whether Universal must indemnify Franklin for the Original MMPA judgment (equitable garnishment) | Policy covers "damages" from an "occurrence"; ambiguities favor coverage, so Universal must indemnify judgment including punitive/attorney-fee components | Policy defines "occurrence" as an accident "neither intended nor expected" and excludes dishonest/fraudulent/intentional acts; Franklin's misconduct was intentional so exclusion applies | Reversed: no indemnity — insured's conduct was intentional and not a covered "occurrence" under the policy (Universal cross-appeal granted) |
| Whether Universal is liable for conspiring in/distributing bad-faith settlement proceeds (fraudulent transfer, conspiracy, tortious interference) | MUFTA and definitions of "claim" allow recovery from third parties even absent a lien; Universal aided fraudulent transfer to defeat Heckadons' claims | Without a valid lien against the settlement funds, third-party claims (conspiracy/fraudulent transfer) fail; MUFTA does not eliminate the lien requirement for claims against third parties | Affirmed: summary judgment for Universal on these claims (no third-party liability without lien) |
| Whether trial court properly excluded testimony re: reasons for allocation and validity of attorney's lien (affecting punitive damages and damages calculation) | Testimony (Mayer) explaining inclusion of Tiffany and allocation is relevant to reprehensibility and proper punitive award; limiting instruction could protect liability findings | Trial court excluded it to preserve the effect of default liability finding; argued it would reopen liability | Reversed as to exclusion: exclusion was error; Mayer's testimony should have been admitted subject to limiting instruction; requires retrial on punitive damages (Franklin cross-appeal point granted) |
| Whether trial court properly reduced jury's actual-damages award post-judgment by amount of attorney fee (and had authority to amend after 30 days) | Post-judgment reduction invaded jury's province; amendment improperly substituted judge's assessment for jury verdict; if motion was untimely, court exceeded its authority | Franklin argued §484.130 created an attorney lien making reduction proper; post-trial motion extended court's power and relief sought was within permissible post-trial motions | Partial: Court had authority to rule on the post-trial motion, but reducing the verdict by substituting the court’s assessment for the jury was improper; trial court erred in how it amended judgment — reversed and remanded for further proceedings |
Key Cases Cited
- Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976) (standard of review for bench-tried matters)
- McCormack Baron Mgmt. Servs., Inc. v. American Guar. & Liab. Ins. Co., 989 S.W.2d 168 (Mo. banc 1999) (duty to indemnify determined by facts as finally established)
- Lewellen v. Franklin, 441 S.W.3d 136 (Mo. banc 2014) (analysis of reprehensibility and punitive damages for Franklin’s Drive for Life scheme)
- Dean Johnson Ford, Inc. v. Universal Underwriters Ins. Co., 905 S.W.2d 529 (Mo. App. W.D. 1995) (insurer's duty to defend vs. duty to indemnify under similar policy language)
- Wright v. Bartimus Frickleton Robertson & Gorny PC, 364 S.W.3d 558 (Mo. App. W.D. 2011) (attorney's lien under § 484.130 attaches upon filing suit and can bind proceeds against settling third parties)
- Stark Liquidation Co. v. Florists' Mut. Ins. Co., 243 S.W.3d 385 (Mo. App. W.D. 2007) ("occurrence/accident" language interpreted to mean injuries caused by negligence rather than intentional acts)