Court Opinion

ID: 2822904
Source: CourtListenerOpinion
Date Created: 2015-07-30 21:37:03.909172+00
Date Added: 2024-06-11T11:28:38.376022
License: Public Domain

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            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

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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.

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       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

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