Case Summary for September 7, 2006

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Case Summary for September 7, 2006

THE FOLLOWING DOCKET SUMMARIES ARE PREPARED BY THE COURT'S STAFF FOR THE INTEREST AND CONVENIENCE OF THE READER. THE SUMMARIES MAY NOT INCLUDE ALL ISSUES PENDING BEFORE THE COURT AND DO NOT REFLECT ANY OPINION OF THE COURT ON THE MERITS OF A CASE. COPIES OF ALL BRIEFS FILED WITH THE COURT ARE AVAILABLE AT THE SUPREME COURT BUILDING, COURT EN BANC DIVISION. SUMMARIES ARE UNOFFICIAL AND SHOULD NOT BE QUOTED OR CITED.

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DOCKET SUMMARIES
SUPREME COURT OF MISSOURI

9:30 a.m. Thursday, September 7, 2006
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SC87239
Jefferson County Fire Protection District Association, et al. v. Matt Blunt, et al.
Cole and Jefferson counties
Constitutional challenge to a statute defining the regulatory powers of a fire protection district

In 2005, the governor signed into law Senate Bill No. 210, which is codified in section 321.222, RSMo. This section limits the authority of fire protection districts to implement and enforce residential construction regulations. The statute applies only to fire protection districts located within first-class counties with more than 198,000 but fewer than 199,200 inhabitants. Jefferson County currently is the only county to which the statute applies. The Jefferson County fire protection district association and its member fire protection districts filed suit, seeking a declaration that section 321.222 violates the Missouri constitution's prohibitions against "local and special laws." The circuit court determined that the statute was valid and sustained the state and home builders association's motion for summary judgment. The districts appeal.

The districts argue that section 321.222 is an unconstitutional special law in violation of article III, section 40 of the state constitution. They contend the statute was enacted for the sole benefit of home builders operating in Jefferson County. The districts assert that the narrow population criterion is intended specifically to render the statute applicable only to Jefferson County and, therefore, constitutes a "closed ended" classification that is presumptively unconstitutional. The districts argue that even if the population criterion is not intended to apply only to Jefferson County, there is no rational basis for limiting application of the statute to counties with a population between 198,000 and 199,200. They contend the statute also violates article III, section 41, which prohibits the indirect enactment of local and special laws through the partial repeal of a general law. The districts assert that section 321.222 undermines and repeals the general statutory scheme under which the districts first were established.

The state responds that section 321.222 is not an unconstitutional special law. It argues the population criterion is open-ended because the total population of any county may change, thereby rendering the statute potentially applicable to counties other than just Jefferson County. The state contends that population is a reasonable basis for classifications relating to the regulatory powers of fire protection districts.

The Home Builders Association of Greater St. Louis, Jefferson County, and the cities of Arnold and Scotsdale respond that the trial court properly granted them summary judgment. They argue the districts failed to prove that section 321.222 clearly and undoubtedly violates either article III, section 40 or article III, section 41. They contend the statute is a general law with an open-ended population classification that bears a rational relationship to conceivable legislative purposes. They assert that, because the statute contains an open-ended population classification, it does not create a special law by repeal of a general law.

SC87570
State ex rel. Ronnie Christian v. The Honorable Jacqueline Cook
Cass County
Discovery dispute regarding documents in an insurance file

In September 1999, Ronnie Christian was involved in an auto accident in which three people were killed. State Farm insured Christian under an automobile liability insurance policy with $50,000 total coverage and a $25,000 per-person limit. The parents of one of the individuals killed in the accident sued Christian, and State Farm hired an attorney to defend him. After negotiations between State Farm and the parents failed, the parents alleged that State Farm acted in bad faith by refusing to settle the case. State Farm hired the law firm of Deacy & Deacy to advise it regarding the parents' allegations. Christian's attorney subsequently negotiated a settlement in which the parents would receive monetary compensation from State Farm, and Christian would cooperate in subsequent actions against State Farm. The parents filed an equitable garnishment action against Christian, and Christian filed a cross-claim against State Farm alleging bad faith during settlement negotiations. Christian then filed a request for production of documents directing State Farm to turn over his insurance claims file concerning the accident. State Farm objected, asserting that the file contained privileged documents prepared by Deacy & Deacy relating to the bad faith claim. The circuit court determined that the documents were privileged, and Christian seeks relief from this Court.

Christian argues he is entitled to a writ of mandamus requiring the circuit court to order State Farm to turn over his insurance file. He contends that Missouri law entitles him to access to his insurance file.

State Farm responds that a writ should not issue. It argues the circuit court reviewed the documents and did not abuse its discretion in finding that the documents were subject to the attorney-client privilege.

SC87405
Jackson County, Missouri v. State of Missouri, et al.
Cole and Jackson counties
Constitutional challenge to statutes regarding expenditures by county executives and qualifications for candidates for public office

The governor signed into law House Bill No. 58. This bill enacted section 67.2555, RSMo, requiring competitive bids on all expenditures of more than $5,000 made by the county executive of a county with a charter form of government and having more than 600,000 but fewer than 700,000 inhabitants. HB 58 also enacted section 115.348, RSMo, which prohibits persons with federal criminal records from qualifying as candidates for public office. Jackson County filed suit, seeking a declaration that sections 67.2555 and 115.348 were unconstitutional. The circuit court determined that section 67.2555 was an unconstitutional special law in violation of article III, section 40(30) of the Missouri constitution because there was no rational basis for imposing bidding requirements on counties based solely upon population. The court overruled the county's challenges to section 115.348. The state appeals from court's judgment that section 67.2555 is an unconstitutional special law. Jackson County cross-appeals.

The state argues the court erred in finding that section 67.2555 was an unconstitutional special law. It contends that the Jackson County executive has broader powers than county executives in other first-class counties and that this constitutes a rational basis for the added restrictions in section 67.2555. The state asserts that there are no other constitutional provisions that support the court's judgment invalidating section 67.255 and that the judgment, therefore, must be reversed.

In response to the state's arguments, Jackson County argues the circuit court did not err in finding that section 67.2555 was an unconstitutional special law because the statute is arbitrary and not rationally related to a legitimate legislative purpose. The county contends the purpose of section 67.2555 is to combat corruption and that it is irrational to limit such legislation to counties with a certain population. The county further responds that the court's judgment can be affirmed on alternate grounds. It asserts that section 67.2555 is unconstitutionally vague and overbroad and that it violates article VI, section 18 (right to operate as a charter form of government), article III, section 21 (change of original purpose), article III, section 23 (no bill can contain more than one subject) and article III, section 43 (notice of proposed local and special law).

On cross-appeal, Jackson County argues the circuit court erred in not finding that sections 67.2555 and 115.348 are constitutionally invalid. It contends section 67.2555 violates article VI, section 18 because the statute impermissibly infringes upon the county's right, under it charter form of government, to set out the powers and duties of public officers. The county contends this Court's decision in Rizzo v. State, 189 S.W.3d 576 (Mo. banc 2006) (holding that section 115.348 violates article III, sections 21 and 23) controls the outcome of this appeal. It asserts that section 67.2555 is unconstitutionally vague because the term "expenditure" is subject to multiple interpretations. Finally, the county argues that section 67.2555 is a special law and that the circuit court erred in not finding the statute unconstitutional because there was no notice of a proposed local and special law as required by article III, section 43.

In response to Jackson County's cross-appeal, the state argues that section 67.2555 does not violate article VI, section 18 because whether county officers must follow competitive bidding requirements does not interfere with the manner in which Jackson County organizes government and allocates power among county officers. The state asserts that even if the addition of section 115.348 changed the original purpose of HB 58, section 67.2555 is not rendered invalid because the statute is related directly to the regulation of political subdivisions, which was the bill's purpose. The state responds that Rizzo does not support Jackson County's argument and that the county has not raised the issue properly of whether the title to HB 58 is unclear. The state argues Jackson County, a political subdivision, is not entitled to assert a due process challenge based on vagueness. The state contends that section 67.2555 is not a special law and, therefore, that article III, section 43 has no application in this case.

SC87418
Albert J. Stone and Tammy Stone, In Their Capacity as Assignees of Arlene M. Bateman v. Farm Bureau Town & Country Insurance Company of Missouri, A Missouri Corporation
Greene County
Effectiveness of notice to cancel an insurance policy

Gary and Arlene Bateman purchased auto insurance from Farm Bureau Town & Country Insurance Company. The policy contained a provision allowing Farm Bureau to cancel the policy for nonpayment of premiums upon 10 days notice to the Batemans. Farm Bureau sent the Batemans two notices indicating that a premium payment was due and that no insurance would be provided if payment was not received. The Batemans did not pay the premium. On October 10, 2002, Farm Bureau mailed the Batemans a cancellation notice listing the policy number and the vehicle insured and stating that the policy was cancelled on October 9, 2002. In December 2002, Arlene Bateman was involved in an auto accident with a vehicle occupied by Albert and Nadine Stone. Nadine Stone was killed, and Albert Stone was injured seriously. In February 2003, the Batemans sent a premium payment to Farm Bureau. Farm Bureau took the position that the policy had been cancelled and returned the Batemans' check. In July 2003, the Stones filed separate lawsuits against Arlene Bateman. Farm Bureau asserted that the policy had been cancelled prior to the accident, denied coverage and refused to defend either lawsuit. The Stones obtained judgments totaling $906,000 against Arlene Bateman, who assigned all claims against Farm Bureau to the Stones. In March 2004, the Stones sued Farm Bureau, asserting claims for breach of contract, breach of fiduciary duty to defend, breach of fiduciary duty to settle, bad faith failure to defend, bad faith failure and refusal to settle, and for punitive damages. The circuit court determined that Farm Bureau's notice of cancellation was ineffective and entered a judgment in the Stones' favor for breach of contract, assessing more than $1 million in damages and post-judgment interest. The court sustained Farm Bureau's motion for summary judgment as to the remaining counts of the Stones' petition. The Stones appeal, and Farm Bureau cross-appeals.

The Stones raise four points on appeal. First, they argue the circuit court erred in sustaining Farm Bureau's motion for summary judgment on Count II (breach of fiduciary duty to defend) and Count III (breach of fiduciary duty to settle). They contend there was uncontroverted evidence that Farm Bureau did not respond to the demand letter sent to the Batemans. Second, the Stones assert that the circuit court erred in sustaining Farm Bureau's motion for summary judgment on Counts IV (bad faith failure to defend) and Count V (bad faith failure to settle). They argue that, while the circuit court correctly determined that Farm Bureau's cancellation was ineffective, the court erred by not allowing a trial on Counts II, III, IV and V. Third, the Stones contend the circuit court erred in sustaining Farm Bureau's motion for summary judgment on Count VI (punitive damages). They assert that Farm Bureau did not establish that its conduct did not warrant punitive damages. Finally, the Stones argue the circuit court erred in entering summary judgment on Counts II through VI on the theory that the Stones would receive full recovery for all damages by the grant of summary judgment on Count I. The Stones contend they are entitled to assert multiple, consistent theories of recovery.

Farm Bureau raises three points on cross-appeal. First, it argues the circuit court erred in sustaining the Stones' motion for summary judgment on Count I (breach of contract) because Farm Bureau validly had cancelled the Batemans' insurance. Second, it contends the circuit court erred in entering judgment on Count I in the amount of $1,004,295 because, even if the policy was not cancelled, the policy limited coverage to $250,000. Finally, Farm Bureau asserts that the Stones did not have standing to assert a claim for breach of contract on behalf of Arlene Bateman because there was insufficient evidence of an assignment of the claims and because there was no consideration to support the alleged assignment.

In response to Farm Bureau's arguments, the Stones argue the cancellation was ineffective because Farm Bureau did not comply with the policy requirement of 10 days notice prior to cancellation. They note that the October 10, 2002, cancellation notice stated that the policy had been cancelled on October 9, 2002, and, therefore, could not give the required 10-day notice prior to cancellation. The Stones contend the two notices requesting payment did not constitute adequate notice of actual cancellation because the notices provided only that Farm Bureau might cancel the policy at some future date. The Stones assert that the circuit court did not err in entering judgment in excess of the policy limits because an assessment of all damages is required in order to compensate the insured wholly for all damages caused by the alleged breach of contract. Finally, the Stones respond that they have standing to assert claims against Farm Bureau on behalf of Arlene Bateman because there was a valid assignment and that Farm Bureau, which was not a party to the assignment, lacks standing to challenge the assignment.

In response to the Stones' arguments, Farm Bureau argues the circuit court did not err in dismissing Counts II through VI of the Stones' lawsuit. It contends that the insurance policy had been cancelled and that it was under no obligation to defend or settle the lawsuit on the Batemans' behalf. It asserts that when the Stones elected to seek summary judgment on Count I (breach of contract), they waived the remaining tort claims. Farm Bureau responds that the Stones did not have standing to assert claims on behalf of Arlene Bateman. It further argues the circuit court did not err in dismissing the Stone' punitive damages claim because Missouri law provides that punitive damages are unavailable in a breach of contract case except in two circumstances, neither of which the Stones pleaded.