WILLIAM W. FRANCIS, JR., C.J./P.J.
Plaintiff Jerry Jacob McClain, by and through his mother and next friend, Lori Rutledge (collectively "McClain"), Dr. Allen Northern, and Rolla Medical Group and Women's Clinic, Inc. (collectively "Northern"), appeal from a judgment in favor of Defendants James Flanary, James Cesar, Alan Doerhoff, Carter Fenton, Adeluolag Lipede, Benny Thomas, John Linde, and John Schwent (collectively "Physicians"), Lloyd Downard, Mary James as defendant ad litem for the Estate of Charles James, and Physicians Defense Association ("PDA") on all eleven counts of Plaintiffs' Fourth Amended Petition. Counts II through VII, "equitable claims of action," were bench-tried on July 26, 2012, without jury involvement by agreement of the parties. Counts I and VIII through XI, "legal claims of action," were decided by summary judgment on December 13, 2012, resulting in the final judgment now before us. For reasons stated herein, we affirm the judgment as to Counts II through X, but reverse and remand as to Counts I and XI.
This is the third trip to this court for these historically-complex proceedings. See McClain v. Carpio, 338 S.W.3d 361 (Mo.App. S.D.2011); Northern v. Physicians Defense Association, 88 S.W.3d 130 (Mo.App. S.D.2002). We borrow extensively from Carpio, 338 S.W.3d at 364-68, in describing the background of the litigation.
In April 1986, the Director of the Missouri Division of Insurance ("DIFP"),
On January 1, 1995, Northern purchased a professional liability insurance policy ("the Policy") from PDA covering the period January 1, 1995, to December 31, 1997, which provided coverage in the amounts of $200,000 per person and $600,000 per occurrence for "claims made."
During that coverage period, on January 2, 1997, McClain filed a medical malpractice claim in Phelps County Circuit Court against Northern and others based on their negligence during Jerry McClain's delivery and birth on May 2, 1995 ("McClain I"). Jerry McClain was born with severe birth defects.
Also during the first part of 1997, PDA's board of directors decided to discontinue business and endorsed another insurance carrier to replace outstanding policies of liability insurance. All business activity of PDA associated with new business and underwriting was discontinued effective July 1, 1997. A special meeting of the PDA members was held on August 12, 1997, at which the members voted to dissolve PDA. The membership also accepted the resignation of the board of directors and approved the appointment of Lloyd Downard and Charles James to continue as officers and trustees of PDA to complete all acts necessary for its dissolution. Also on that date, PDA's membership and board of directors approved payment to Lloyd Downard and Charles James in the sum of $168,000 each, which had not previously been required by their employment contracts.
In 1997, at the time of these actions, all Physicians were PDA members.
Between August 25, 1997, and September 29, 1997, PDA distributed to some Physicians sums ranging from $965 to $19,046.
McClain's malpractice case that was pending in Phelps County was dismissed without prejudice in June 1999 and then
After a trial on the record, judgment was entered in McClain II on August 10, 2000, in favor of McClain and against Northern in the amount of $14,425,916. This judgment also found that a section 537.065 settlement agreement entered into between McClain and Northern on March 27, 2000, was made in good faith and was reasonable.
In September 2000, Plaintiffs filed a three-count action against PDA ("McClain III") in which Plaintiffs sought a declaration that the Policy issued by PDA covered the McClain II judgment; McClain sought equitable garnishment; and Northern sought damages against PDA, his insurer, for failing to defend and indemnify him against McClain's malpractice claims.
On or about December 1, 2000, PDA again distributed to some Physicians sums ranging from $100 to $4,900.
On January 29, 2001, Downard, in his capacity as secretary of PDA, signed and filed Articles of Dissolution and Articles of Termination with the Missouri Secretary of State. The articles stated that "all debts, obligations and liabilities of the corporation have been paid and discharged, or adequate provision has been made therefore." Contrary to that representation, PDA had not made adequate provision to discharge its liabilities, specifically the judgment entered against it in McClain II, nor any contingent plans for potential liability in McClain III Downard testified in his deposition
PDA published notice of dissolution and notice to file claims pursuant to section 351.482(3), RSMo (previously section 351.565, RSMo) in the Jefferson City Tribune on February 9, 2001, and in Missouri Lawyers Weekly on February 12, 2001.
By letter dated February 12, 2001, counsel for Jerry McClain provided notice to PDA of his claims and the judgment in McClain II against Northern. The letter also advised of the pending McClain III action.
Partial summary judgment was entered in McClain III on October 23, 2001, in favor of Plaintiffs and against PDA, finding that PDA's Policy provided coverage for the judgment in McClain II On interlocutory appeal in Northern, this court affirmed.
Thereafter, on May 12, 2003, the trial court in McClain III finally decided Northern's damages claim, entering a $15,000 judgment in Northern's favor against PDA "as compensatory damages for [PDAJ's breach of contract]." PDA did not appeal, nor has PDA satisfied
In March 2003, Plaintiffs filed their original petition in this action against Charles James and thirty-five unknown and unnamed directors of PDA, seeking recovery for alleged fraudulent transfers made by Charles James, as president of PDA, in 1997, to PDA's directors. Plaintiffs amended their petition in 2004, 2006, and 2007.
In March 2010, Plaintiffs filed the eleven-count Fourth Amended Petition at issue in this case (hereafter "Petition").
The trial court conferred with counsel after this Court's Carpio remand. The parties agreed that Counts I and VIII-XI were "legal claims of action," and that all other counts were "equitable claims of action" which "contain issues of fact to be determined by a jury." Subsequently, however, Plaintiffs announced that "no facts as presented in Counts II, III, IV, V, VI, or VII, [were] to be preserved and presented for determination at a trial by jury." The parties agreed that these equitable claims could be wholly bench-tried, which took place on July 26, 2012. The
Later, PDA, James, and Downard moved for summary judgment on the remaining legal claims, which the trial court granted on December 13, 2012.
Plaintiffs raise eight points on appeal. Six involve the court-tried claims, which we consider first.
Plaintiffs' points challenge only three of the six court-tried results: Counts II, V, and VII. Even then, five of six points address only affirmative defenses or other alternative grounds for the court's decision.
We must affirm the judgment as to bench-tried claims unless it is not supported by substantial evidence, it is against the weight of the evidence, or it erroneously declares or applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). The judgment is presumed correct, and Plaintiffs have the burden of proving otherwise. Surrey Condo. Ass'n v. Webb, 163 S.W.3d 531, 535-36 (Mo.App. S.D.2005).
We view the record and all reasonable inferences most favorably to the judgment, disregarding all contrary evidence and inferences. Id. at 536. "`Judging credibility and assigning weight to evidence and testimony are matters for the trial court, which is free to believe none, part, or all of the testimony of any witnesses.'" Id. (quoting Savannah Place, Ltd. v. Heidelberg, 122 S.W.3d 74, 86 (Mo. App. S.D.2003)).
This bench-tried judgment includes numerous factual findings; we consider "all other factual issues to have been determined in accordance with the result reached." Grider v. Tingle, 325 S.W.3d 437, 441 (Mo.App. S.D.2010).
"Finally, we are primarily concerned with the correctness of the trial court's result, not the route taken by the trial court to reach that result. Therefore, we will affirm the trial court's judgment under any reasonable theory supported by the evidence." Surrey Condo., 163 S.W.3d at 536 (internal citation omitted).
Count II sought a writ of mandamus ordering PDA to assess its members to satisfy the $14 million judgment. For relief in mandamus, Plaintiffs had to prove (1) their "existing, clear, unconditional legal right" to that assessment, and (2) "a corresponding present, imperative, unconditional duty" of PDA (or some defendant) to do so. State ex rel. St. Joseph Hospital v. Fenner, 726 S.W.2d 393, 395 (Mo.App. W.D.1987). Plaintiffs, on appeal, do not even suggest that they proved either of these.
As the judgment notes, special assessments were "`at the discretion of the Board of Directors'" (quoting PDA Bylaws; trial court's emphasis), a finding not challenged on appeal. Mandamus does not
In Count V, Plaintiffs alleged that the trial court had "inherent equitable power" to assess Physicians, as PDA members, $14 million pro rata. The trial court disagreed, noting that "liability of the members of a Chapter 383 association is limited by § 383.025:
On appeal, Plaintiffs cite only a 1907 case that enforced an Ohio court's $212.53 assessment under an Ohio statute.
To assert that courts "inherently" can assess PDA members is not consistent with section 383.025. The trial court did not err in denying Count V.
Count VII of the Petition alleges a claim for fraudulent transfer to directors and members while the McClain claims were pending. Had the trial court believed Plaintiffs' evidence and ruled in their favor, our standard of review almost certainly would require us to defer to the trial court and affirm its decision.
But Plaintiffs did not persuade that court, which weighed the proof and found:
Our deference to such credibility findings, express and implied, defeats Plaintiffs' "against the weight of evidence" complaint. See Ivie v. Smith, 439 S.W.3d 189, 205-08 (Mo. banc 2014).
Indeed, no evidence is needed to sustain this judgment. Plaintiffs bore the burden of proof. The trial court found their evidence not persuasive or credible. To quote our supreme court in Ivie, "the circuit court is free to believe all, some, or none of the evidence offered to prove a contested fact, and the appellate court will not re-find facts based on credibility determinations through its own perspective." Id, 439 S.W.3d at 206. "This Court defers to the circuit court's determinations [of credibility]. Therefore, the circuit court's judgment was not against the weight of the evidence." Id, 439 S.W.3d at 207.
The trial court did not err in granting Defendants judgment on Counts II, III, and VII. Plaintiffs do not challenge the judgment against them as to Counts III, IV, or VI. Thus, we affirm the judgment as to Counts II through VII inclusive.
These claims involve just three Defendants: Charles James (Count I), Downard (Count I), and PDA (all legal claims). Our principles of review on summary judgment are nearly opposite of what they were in reviewing the court-tried claims.
In determining whether a trial court has properly granted summary judgment, we review the matter de novo and give no deference to the trial court's decision. Goerlitz v. City of Maryville, 333 S.W.3d 450, 452 (Mo. banc 2011); State ex rel. Nixon v. Bass, 282 S.W.3d 343, 344 (Mo. banc 2009). We employ the same criteria the trial court should have used in deciding whether to grant the motion. Barekman v. City of Republic, 232 S.W.3d 675, 677 (Mo.App. S.D.2007).
We review the record in the light most favorable to the party against whom judgment was entered and accord the non-movant the benefit of all reasonable inferences. ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). In this case, PDA, James, and Downard were "defending" parties and in order to establish a right to summary judgment they must show:
Id. at 381 (emphasis in original). "[A] `genuine issue' exists where the record contains competent materials that evidence
Summary judgment is an extreme and drastic remedy and we exercise great caution in affirming it because the procedure cuts off the opposing party's day in court. Id. at 377.
Bearing these principles in mind, we address the summary judgment counts out of order.
In McClain III, Northern sought damages from his insurer PDA for failing to properly defend, protect, and indemnify him against McClain's malpractice claims. His theory was breach of contract. He won a money judgment against PDA, now final.
Here, Northern again seeks damages from his insurer PDA for failing to properly defend, protect, and indemnify him against McClain's malpractice claims. His new theories are "bad faith" (Count VIII), "negligent claims handling" (Count IX), and "breach of fiduciary duties" (Count X).
Northern's new counts violate res judicata's bar on claim splitting. See Chesterfield Village v. City of Chesterfield, 64 S.W.3d 315, 318-21 (Mo. banc 2002); King Gen. Contractors v. Reorganized Church, 821 S.W.2d 495, 501-02 (Mo. banc 1991); Palmore v. City of Pacific, 393 S.W.3d 657, 664-67 (Mo.App. E.D.2013); Dahn v. Dahn, 346 S.W.3d 325, 331-32 (Mo.App. W.D.2011); Chadd v. City of Lake Ozark, 326 S.W.3d 98, 101-03 (Mo.App. W.D. 2010); Williams v. Rape, 990 S.W.2d 55, 59-61 (Mo.App. W.D.1999). See also RESTATEMENT (Second) of Judgments §§ 24, 25 (1982). Summary judgment was proper as to these counts.
Count I seeks recovery for fraud. To prevail on such a claim, a plaintiff must prove:
Artilla Cove Resort, Inc. v. Hartley, 72 S.W.3d 291, 296-97 (Mo.App. S.D.2002) (quoting Thoroughbred Ford, Inc. v. Ford Motor Co., 908 S.W.2d 719, 731 (Mo.App. E.D.1995)). "The falsity element of fraud relates to a speaker's reckless disregard of the truth or falsity of the statement as opposed to a speaker's negligent failure to exercise reasonable care or competence to ensure that truthful information is being relayed." Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 135 n. 22 (Mo. banc 2010). To recover damages based upon fraudulent representations, it is not necessary that it be shown that a defendant had actual knowledge of the falsity of the facts stated by him. It is sufficient that he made the representations with the consciousness that he was without knowledge as to their truth or falsity, when in fact, they were false.
Because of the nature of fraud, it is rare for a party accused of fraud to come forward and admit it. However, "[f]raud can be shown by circumstantial evidence[.]" Osterberger v. Hites Construction Company, 599 S.W.2d 221, 229 (Mo.App. E.D.1980). As "fraud is seldom capable of direct proof," it may be established by a variety of circumstances combined together. Watson v. Harris, 435 S.W.2d 667,
When statutes or regulations impose an obligation on a person in the course of their profession or employment, the duty owed by the statute or regulation is a public one and the duty to do so truthfully extends to all persons within the class of persons for whose benefit the duty is created. B.L. Jet Sales, Inc. v. Alton Packaging Corp., 724 S.W.2d 669, 672 (Mo. App. E.D.1987). One need not be the direct hearer of a false statement in order to pursue a cause of action in fraud. See Wagner v. Mortgage Information Services, Inc., 261 S.W.3d 625, 640 (Mo.App. W.D. 2008). Furthermore, when a person, in the course of their profession or employment, gives false information and is under a public duty to give the information, that person is liable for the losses "suffered by any of the class of persons for whose benefit the duty is created[.]" B.L. Jet Sales, Inc., 724 S.W.2d at 672. A public duty arises when regulations require certain actions be taken. Under those circumstances, the duty extends to the class of persons for whose benefit the duty is created by the statute or regulation. Id. at 672-673. An intentional or fraudulent act by a corporation is a breach of trust, which may permit an action by a creditor. Drummond Company v. St. Louis Coke & Foundry Supply Co., 181 S.W.3d 99, 103 (Mo.App. E.D. 2005). Corporate directors and officers who exceed their trustee-like statutory duties in winding up the business affairs of a dissolved corporation may become personally liable pursuant to section 351.476.2(3). Id. at 104.
The statutes and regulations regarding the dissolution of a corporation require that a corporation maintain a solvent position until its liquidation has been completed. The reason for these statutes and regulations are so the corporation can satisfy, or attempt to satisfy, its debts and obligations to all creditors and claimants. PDA's creditors clearly fall within that class of people that the statutes and regulations are established to protect. Plaintiffs clearly fall within the class of persons for whom protection is available.
As an association formed to operate under Chapter 383, PDA was bound to comply with the requirements for dissolution as set forth in Chapter 355.
The summary judgment record includes evidence that PDA, by and through its trustees Downard and James, made at least two statements that raise this material issue of fact. The first statement was made in a November 11, 1998 letter to Steven Divine, Chief Financial Examiner for the DIFP, indicating that PDA had amended its compensation contracts to limit compensation of its officers/employees — who at that time were Downard and James. The second statement occurred on January 29, 2001, when PDA filed Articles of Termination with the Missouri Secretary of State that stated "[a]ll debts, obligations and liabilities of the corporation have been paid and discharged, or adequate provision had been made therefore." Plaintiffs are and were creditors of PDA, and they hold judgments that have not been satisfied.
Following January 29, 2001, when the Articles of Termination were filed, in reliance on those Articles, the Missouri Secretary of State issued a Certificate of Termination, certifying that PDA ceased to exist.
We believe that reasonable jurors could infer, from the evidence we have cited, that the information provided by the trustees was false and that it was given without exercising reasonable care or with the knowledge that it was false.
There is also evidence that PDA, by and through its trustees, did not follow the statutory procedure by which a non-profit corporation is to terminate and dissolve.
Inspector Engel made the following comments to PDA in his final report:
In response to this comment, Downard, on behalf of PDA, in its November 11, 1998 letter to the DIFP, stated: "Compensation contracts between [PDA] and its officers/employees were amended to provide for limited annual compensation or payment upon dissolution whichever event occurs first." However, there was evidence, as set forth above, that a jury could believe that the statements regarding the compensation contracts were false.
Plaintiffs are in the class of people who are protected by their position as corporate creditors. It is incumbent upon PDA, by and through its trustees, to make truthful statements to the DIFS and the Missouri Secretary of State so that corporate creditors, among others, may be protected
Based on the foregoing, Plaintiffs have established that genuine issues of material fact exist that PDA, by and through its directors and trustees, Downard and James, committed fraud as alleged in Count I. Count XI seeks punitive damages for fraud as alleged in Count I. Because that is still an issue for the trier of fact, it must be reversed, also. We reverse the summary judgment granted as to Counts I and XI.
We reverse the judgment with respect to Counts I and XI only, and remand those counts to the trial court for further proceedings consistent with this opinion. In all other respects, the judgment is affirmed.
NANCY STEFFEN RAHMEYER, P.J., concurs in majority opinion.
DANIEL E. SCOTT, J., concurs in part and dissents in part in separate opinion.
DANIEL E. SCOTT, Judge.
I concur in affirming the judgment as to Counts II through X. I respectfully dissent from the reversal as to Counts I and XL
Count I alleged fraud in two respects. One has been abandoned on appeal.
Plaintiffs thus sought to recover some $14 million "as a consequence of the State of Missouri and Secretary of State Matt Blunt's reliance on said statements...."
I do not see how these allege a fraud upon Plaintiffs, especially since Plaintiffs did not and do not now claim that they relied on Downard's statements. Cases cited by Plaintiffs and the principal opinion are distinguishable and not persuasive.
I acknowledge that some third parties can claim fraud if they reasonably relied on a misrepresentation (e.g., investors burned because a company gave its auditors false data). But Plaintiffs do not claim they relied, much less reasonably relied, on Downard's termination filing.
Plaintiffs cite no solid support for extending fraud liability. I cannot find such authority either and am reluctant to make
I would affirm the judgment in its entirety.
Kelley v. Widener Concrete Const., LLC, 401 S.W.3d 531, 543 (Mo.App. S.D.2013). Plaintiffs' failure to follow this framework renders their argument "analytically useless and provides no support for [their] challenge." In re Marriage of Adams, 414 S.W.3d 29, 34 (Mo. App. S.D.2013). See also Houston v. Crider, 317 S.W.3d 178, 188 (Mo.App. S.D.2010).