Court of Appeals of Missouri, Western District, First Division
DIANA LYNN HECKADON, PERSONAL REPRESENTATIVE OF THE ESTATE OF DAVID HECKADON, DECEASED, AND DIANA LYNN HECKADON, Appellant-Respondents,
UNIVERSAL UNDERWRITERS INS. CO., ET AL.; Respondent-Appellants, CHAD FRANKLIN; CHAD FRANKLIN NATIONAL AUTO SALES NORTH, LLC; AND CFS ENTERPRISES, INC., Respondent-Appellants.
from the Circuit Court of Clay County, Missouri The Honorable
Timothy Jon Flook, Judge
Lisa White Hardwick, P. J., Edward R. Ardini, and Thomas N.
N. CHAPMAN, JUDGE
appeal and cross-appeal are taken from a judgment in a case
wherein David and Diana Heckadon ("Heckadons")
sought to recover against Universal Underwriters Insurance
Company ("Universal") and Chad Franklin
("Chad"),  CFS Enterprises ("CFS"), and
Chad Franklin National Auto Sales North ("NAS")
(collectively "Franklin"), on a variety of theories
alleging wrongdoing in failing to pay an earlier judgment the
Heckadons had secured against Chad and CFS. The earlier
judgment was secured after the Heckadons purchased a vehicle
from Chad and CFS, pursuant to their "Drive for
Life" program, then filed a lawsuit alleging fraudulent
misrepresentation and violation of the Missouri Merchandising
Practice Act (MMPA), section 407.010, et seq., RSMo.
(hereinafter "Original MMPA Action"). The Original
MMPA Action resulted in the Heckadons receiving a judgment
totaling $616, 534.87. Universal was separately sued by Chad, NAS
and Tiffany Franklin ("Tiffany") after Universal
denied coverage of the Heckadons' Original MMPA Action,
and settled that suit for $900, 000, none of which was paid
to the Heckadons.
the Heckadons brought the instant action against Universal,
Chad, CFS, NAS, and Tiffany. The judgment from which this
appeal and cross-appeal are taken found in favor of the
Heckadons and against Universal and Franklin on some, but not
all of the Heckadons' claims. Because both Universal and
Franklin cross appeal we will refrain from referring to the
parties as Appellant and Respondent and will instead (when
referring to them in their capacity as litigants) use the
terms from the trial court, i.e., Plaintiffs and Defendants.
Given the number of issues in this appeal, we begin by
summarizing the conclusions reached with respect to each
Garnishment Bench Trial
Heckadons asserted claims for equitable garnishment and
declaratory judgment against Universal, seeking to determine
Universal's obligations to indemnify the Original MMPA
Action judgment. After a bench trial, the trial court
determined that coverage applied and entered judgment against
Universal in the sum of $647, 421.39 (the amount of the
Original MMPA Action judgment). In Points 1, 2, and 3 of its
cross appeal, Universal argues that the court misapplied the
law in construing the insurance policy and finding coverage.
We find that Franklin's conduct which was the basis for
the Original MMPA Action judgment was not a covered
occurrence under the Universal policy. Point 2 of
Universal's cross appeal is granted. The equitable
garnishment judgment entered against Universal is
Judgment In Favor of Universal Regarding Settlement of Bad
Heckadons made additional claims contending that the
settlement among Universal, Franklin, and Tiffany resulted in
a distribution of settlement proceeds that was in fraud of
their rights. The trial court granted Universal's motion
for summary judgment, finding that it was not liable for the
Heckadons' claims relating to its distribution of the bad
faith settlement proceeds. In Points 3, 4, and 5 of their
appeal, the Heckadons claim that the trial court erred in
granting summary judgment on these claims. We affirm the
Summary Judgment in favor of Universal.
Trial Regarding Franklin's Settlement of Bad Faith
discovery violations by Franklin, the trial court sanctioned
Franklin by striking its pleadings and entering an
interlocutory default judgment finding Franklin liable for
its distribution of the bad faith settlement proceeds. A jury
trial was conducted to determine the damages to be assessed
on the fraudulent transfer and MMPA claims against Franklin.
The jury awarded the Heckadons $647, 334 in actual damages on
the fraudulent transfer claims against Franklin, and punitive
damages of $500, 000 against Chad, $500, 000 punitive damages
against NAS, and $500, 000 punitive damages against
Franklin filed a post-trial Motion to Amend the Judgment,
asserting that the amount paid to its attorney in the
underlying bad faith claim was subject to a valid lien and
not eligible for consideration as potential damages related
to the fraudulent transfer claim. Finding that it erred in
holding that § 484.130 did not establish a valid
attorney fee lien, the trial court sustained the motion and
reduced the award of actual damages against Franklin by the
amount paid to Mayer, resulting in an award of $266, 370.41.
Point 1 of their appeal, the Heckadons maintain that the
trial court did not have the authority to amend the judgment
more than 30 days after the judgment was entered. In Point 2
they contend that this reduction (by the amount of the
attorney fee lien) improperly substituted the court's
verdict for the jury's verdict in the assessment of
actual damages. We find that the court had the authority to
properly amend the judgment more than 30 days after
it was entered, but that its amendment reducing the actual
damages by the amount of the attorney's fee was improper.
Point 1 of the Heckadons' appeal is denied. Point 2 of
the Heckadons' appeal is granted in part.
cross appeals, asserting (in Point 1) that the trial court
erred in striking its pleadings and entering default judgment
on the issue of liability; asserting (in Point 2) that the
trial court erred in submitting a modified instruction which
failed to require the jury to make the findings (of
outrageous conduct or reckless disregard) necessary to impose
punitive damages; asserting instructional error (in Point 3)
regarding the verdict form; and asserting (in Point 4) that
the trial court erred in refusing to allow its attorney to
testify regarding the reasons for allocation and distribution
of the bad faith settlement proceeds. We find that the trial
court did not err in striking Franklin's pleadings, and,
therefore, deny Point 1 of Franklin's cross appeal. We
find that the trial court erred in excluding testimony
explaining the bad faith settlement, and, therefore, grant
point 4 of Franklin's cross appeal. Since the effect of
the trial court's evidentiary errors materially affected
the merits and outcome of the proceeding, the judgment for
actual and punitive damages against Franklin is reversed and
remanded for proceedings consistent with this opinion. Given
our disposition of Point 4, we find it unnecessary to address
the claims of instructional error raised in Points 2 and 3 of
Franklin's cross appeal.
September 2007, the Heckadons purchased a car from Chad and
CFS under the "Drive for Life"
promotion. To participate in this promotion the
Heckadons signed documents obligating them to a high interest
loan to purchase the car, with Franklin agreeing to send them
sufficient funds on a monthly basis to reduce their effective
payment to only $49 a month. Unbeknownst to them at the time,
the amount bundled into the loan included a charge for a
$499.95 membership fee for participation in "Drive for
Life," gap insurance, and an extended warranty for a car
they were (under the terms of the promotion) to own for only
one year. In 2008 the Heckadons traded in their first vehicle
and selected a second. They were again charged a $499.95
membership fee for participation in "Drive for
Life," a separate charge for gap insurance, and a
separate charge for another extended warranty fee. While the
sticker price of the vehicle was $17, 495, the price they
were charged was $19, 495. Approximately ten months after
they began participating in the program (sometime in the
middle of 2008) Franklin stopped providing its share of the
payments and the Heckadons then discovered that they were
obligated for the full loan amount and monthly payments of
$649.37 per month.
December of 2009, the Heckadons filed the Original MMPA
Action against Chad and CFS, alleging violation of the MMPA.
In May 2011, a jury awarded the Heckadons $647, 421.39,
including actual damages, punitive damages, and
attorney's fees on their MMPA claim.
in October of 2008, Franklin initiated a bad faith lawsuit
against Universal, eventually adding Tiffany Franklin, the
wife of Chad Franklin, as a plaintiff. The bad faith lawsuit
settled for $900, 000 on August 31, 2010. The settlement
agreement provided that $250, 000 would go to Fifth Third
Bank, a creditor; $383, 629.59 to Monsees, Miller, Mayer,
Presley & Amick (the attorneys who prosecuted the bad
faith lawsuit for Franklin hereinafter referred to as
"Mayer"); and $266, 370.41 to Tiffany Franklin.
April 2012, the Heckadons filed their petition in the instant
action. In February of 2016, after repeated failures to
compel Chad to appear at depositions, a hearing was held on
the Heckadons' motion for sanctions. At that hearing, the
trial court ordered Chad to appear at the next deposition in
both his individual capacity and as the representative of the
named entities. Chad again failed to appear at the properly
noticed date. At a hearing on March 29, 2016, on the
Heckadons' renewed motion for sanctions, Chad's
counsel argued that his failure to appear was excusable,
because he had entered an out of state drug rehabilitation
program and was unreachable by counsel. Noting that Chad had
been aware of the ongoing litigation when he entered the
program, that he had failed to inform his counsel prior to
doing so, and that he had engaged in a pattern of
obstruction, the trial court struck the pleadings of
Franklin, and entered a default judgment with respect to
liability against Franklin on Count III (Fraudulent
Transfer); Count IV (Unlawful Merchandising Practice - MMPA);
Count V (Civil Conspiracy); and Count VI (Joint Venture/Joint
agreement of the parties, a bench trial was held on the
equitable garnishment and declaratory judgment counts that
addressed Universal's obligation to indemnify the
Original MMPA Action judgment. Following that bench trial,
the trial court entered judgment against Universal, finding
the policy language ambiguous (regarding coverage of
intentional acts), construing those ambiguities in favor of
coverage, and finding that coverage applied because the
policy provided that it would pay damages in "amounts
awardable by a court of law."
March 30, 2017, the trial court granted a motion for summary
judgment filed by Universal, finding that, as a matter of
law, Universal was not liable on the Heckadons' claims
related to distribution of the bad faith settlement proceeds.
trial was held on the issue of damages to be assessed against
Franklin on the Heckadons' MMPA and Fraudulent Transfer
Claims related to the disposition of the bad faith settlement
funds. While the Heckadons stipulated that the $250, 000
payment to Fifth Third bank was a lien and clearly proper
under Missouri's Uniform Fraudulent Transfer Act
(hereinafter "MUFTA"), they maintained that the
payments made to Mayer and Tiffany were improper. At trial,
Mayer was permitted to testify that his firm represented Chad
and Tiffany in a lawsuit against Universal and that Mayer
received attorney's fees from the settlement amount.
However, the trial court sustained objections to documents
supporting Mayer's assertion that his firm possessed a
valid lien, and, in the absence of those documents, Mayer was
not permitted to testify that his firm complied with the
statutory requirements for a lien under MUFTA.
jury awarded $647, 334 in actual damages against Franklin,
and punitive damages of $500, 000 each against Chad, NAS, and
CFS for a total judgment (not including the Heckadons'
attorney's fees) of $2, 147, 334 on the Heckadons'
fraudulent transfer claim. Final judgment was entered on July 24,
2017. On July 28, 2017, the Heckadons moved the trial court
to amend the judgment to include their attorney's fees.
On August 21, 2017, Franklin filed a motion requesting that
the trial court reduce the award of actual damages by the
amount of the attorney's fees paid to Mayer to pursue the
bad faith claims against Universal ($383, 629.59). On August
23, 2017, Franklin filed a motion for new trial, alleging,
among other things, that the trial court erred in refusing to
allow Mayer to testify regarding his attorney fee lien and
the reasons why distributions were made to Mayer and Tiffany
in the bad faith claims settlement. On October 24, 2017, the
trial court entered an amended judgment reducing the actual
damages awarded to the Heckadons by the amount of Mayer's
attorney's fees, awarding the Heckadons their own
attorney's fees, and denying the motion for new trial and
all other post-trial motions. The instant appeal and cross
The Court Erred in Entering Judgment Finding
Universal Obligated to Indemnify the Original MMPA Action
conducting a bench trial on Count I (equitable garnishment)
and Count II (declaratory judgment) the trial court entered
judgment finding that the insurance policy terms were
ambiguous, construing them in favor of coverage, and entering
judgment against Universal for the sums owed by Franklin in
the Original MMPA Action judgment ($647, 421.39). Notably,
the trial court made no findings whether the acts of Franklin
giving rise to the MMPA Action judgment were intentional, and
did not endeavor to discern whether it mattered.
maintains the trial court was in error (1) in finding that
the exclusions in the policy did not apply, (2) in finding
that the actions of Franklin constituted an
"occurrence" as defined by the policy, and (3) in
finding that the term "damages" included punitive
we find no ambiguity in the applicable terms of the policy,
because the definition of covered occurrences did not include
intentional misconduct, and because Franklins' actions
(as alleged by the Heckadons in their claim for punitive
damages in the original MMPA Action) were intentional, we
find that Universal was not obligated to indemnify the
Franklins. We reverse the trial court for the reasons set out
any other court-tried matter, we review the trial court's
judgment under the standard set forth in Murphy v.
Carron, 536 S.W.2d 30 (Mo. banc 1976). Schmitz v.
Great Am. Assur. Co., 337 S.W.3d 700, 705 (Mo. App. W.D.
2010). "[W]e will affirm the judgment unless it is
against the weight of the evidence, it is not supported by
substantial evidence, or it erroneously declares or
misapplies the law." Penn-Star Ins. Co. V.
Griffey, 306 S.W.3d 591, 596 (Mo. App. W.D. 2010).
However, "[t]he interpretation of an insurance policy is
a question of law" and as a consequence our review of
the language of the contract is essentially de novo.
Seeck v. Geico General Ins. Co., 212 S.W.3d 129, 132
(Mo. banc 2007).
beginning our analysis we recognize that "'[i]n
general, an insurance policy is a contract to afford
protection to an insured and will be interpreted, if
reasonably possible, to provide coverage.'"
Safeco Ins. Co. Of Am. V. Smith, 318 S.W.3d 196, 199
(Mo. App. W.D. 2010) (quoting Haulers Ins. Co. v.
Pounds, 272 S.W.3d 902, 905 (Mo. App. S.D. 2008)). In
the process of conducting that review:
It is a longstanding principle that courts "read a
contract as a whole and determine the intent of the parties,
giving effect to that intent by enforcing the contract as
written." In so doing, we give the language in an
insurance contract its plain and ordinary meaning. "If,
giving the language used its plain and ordinary meaning, the
intent of the parties is clear and unambiguous, we cannot
resort to rules of construction to interpret the
Peterson v. Discover Prop. & Cas. Ins. Co., 460
S.W.3d 393, 402-03 (Mo. App. W.D. 2015) (internal citations
omitted) (quoting Thiemann v. Columbia Pub. Sch.
Dist., 338 S.W.3d 835, 840 (Mo. App.W.D. 2011)).
evaluating whether a party pursuing a claim of equitable
garnishment establishes coverage, "the burden of showing
that the loss and damages are covered under the insurance
policy is placed on the plaintiff; the burden of showing that
there is an applicable exclusion is on the defendant
insurer." Am. States Ins. Co. v. Herman C. Kempker
Const. Co., 71 S.W.3d 232, 235 (Mo. App. W.D. 2002).
See also Fischer v. First Am. Title Ins. Co., 388
S.W.3d 181, 187 (Mo. App. W.D. 2012) ("[T]he insured
bears the burden of proving coverage under an insurance
instant case, the trial court found that coverage was
provided under coverage parts 500 and 970 of the 2008
Universal policy which would indemnify Franklin for the
Heckadons' judgment in the Original MMPA Action. The
policy language, in relevant part, provides coverage for
injury as follows:
WE will pay those sums the INSURED legally must pay as
DAMAGES because of INJURY to which this insurance
applies…caused by an OCCURRENCE arising out of YOUR
coverage parts utilize the same definition of
"occurrence" which states, in relevant part:
an accident, including continuous or repeated exposure to
conditions, which results in such INJURY or COVERED POLLUTION
DAMAGES during the Coverage Part period neither intended nor
expected from the standpoint of a reasonably prudent person.
Policy also excludes coverage under both coverage parts, in
pertinent part, as follows:
This insurance does not apply to:
B. Dishonest Acts an OCCURRENCE, SUIT or claim arising out of
any dishonest, fraudulent or criminal acts committed by any
B. Intent to Cause Harm any act committed by or at the
direction of the INSURED with intent to cause harm.
Heckadons asserted, and the trial court found, that the
language of the policy is conflicting and ambiguous. We
disagree, as there is nothing facially vague or ambiguous in
the policy language. The policy provides coverage for
occurrences which it defined as accidents resulting in an
injury "neither intended nor expected from the
standpoint of a reasonably prudent person." The policy
excludes coverage for actions that are dishonest, fraudulent
or criminal, or where harm is intended.
"accident" is not defined, "[i]t is
well-settled Missouri law that when a 'liability policy
defines occurrence as meaning accident Missouri courts
consider this to mean injury caused by the negligence of the
insured.'" Stark Liquidation Co. V.
Florists' Mut. Ins. Co., 243 S.W.3d 385, 393 (Mo.
App. W.D. 2007) (quoting Wood v. Safeco Ins. Co. of
Am., 980 S.W.2d 43, 49 (Mo. App. E.D. 1998). Where the
act was intended and the harm expected or intended, coverage
does not apply. Am. Family Mut. Ins. Co. v. Franz,
980 S.W.2d 56, 57-58 (Mo. App. W.D. 1998); Cameron Mut.
Ins. Co. v. Moll, 50 S.W.3d 329, 332-33 (Mo. App. E.D.
Lewellen v. Universal Underwriters Ins. Co., No. WD
81171, 2019 WL 579635 (Mo. App. W.D. Feb. 13, 2019),
reh'g and/or transfer denied (Mar. 26, 2019)
(hereafter Lewellen II),  in a matter that had been
consolidated with the instant action for trial on issue of
insurance coverage, we recently addressed an identical
policy, found no ambiguity, and addressed covered occurrences
"The determinative inquiry into whether there was an
'occurrence' or 'accident' is whether the
insured foresaw or expected the injury or damages."
However, in reviewing the insured's foresight of these
injuries we employ an objective standard-whether a reasonably
prudent person would foresee this ...