DELL E. TYLER and RICHARD SHUBERT,
d/b/a CABIN BAR AND MOTEL,
Plaintiffs and Appellants,
-VS-
FIREMAN'S FUND INSURANCE COMPANY,
Defendant and Respondent.
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable Ed McLean, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Douglas G . Skjelset, S k j e l s e t Law Offices, Missoula,
Montana
For Respondent:
John E Bohyer, Crowley, Haughey, Hanson, Toole
.
& Dietrich, Billings, Montana
Submitted on Briefs: July 30, 1 9 9 2
Filed:
Justice R. C. McDonough delivered the Opinion of the Court,
This is an appeal by plaintiff Richard Shubert of an order of
the Fourth Judicial District Court grantingthe defendant's motions
for summary judgment on shubertlsclaim for breach of the covenant
of good faith and fair dealing and on defendant's counterclaim for
restitution in the amount of $276,381.41. We affirm.
There are two issues on appeal:
1. Did the District Court err in granting defendant's motion
for summary judgment on plaintiffqs claim of bad faith?
2. Did the District Court err in granting defendant's motion
for summary judgment on defendant's counterclaim for restitution?
The Cabin Bar and Motel, owned by Dell E. Tyler and Richard
Shubert as partners, was destroyed by fire. Investigation by the
Missoula Fire Department and the insurer, Fireman's Fund
(Fireman's) followed. Fireman's did not make payments to the
partners for their losses until six months later when Tyler and
Shubert threatened to file a bad faith action. Thereafter,
Fireman's paid the partners $276,381.41.
Tyler and Shubert filed a bad faith claim against Fireman's
under the Montana Unfair Trade Practices Act. The defendant filed
its initial answer and filed an amended answer after learning that
the fire was caused by arson by one of the partners, Dell E. Tyler.
Later, the defendant filed a motion for summary judgment on a bad
faith claim and on its counterclaim for restitution.
Dell E. Tyler filed a response to defendants' motion for
summary judgment. In this response, he agreed that the bad faith
2
claim should be dismissed as it pertained to him. He also agreed
that Fireman's was entitled to a judgment against him on the issue
of restitution. A hearing on the motion for summary judgment as it
pertained to Shubert, was held and the District Court issued its
order and judgment. A motion by Shubert to reconsider the judgment
concerned only the issue of the restitution counterclaim. The
motion was denied and this appeal followed.
"Under Rule 56(c), M.R.civ.P., summary judgment is proper if
the r e c o r d discloses no genuine issues of material fact, and the
moving party is entitled to judgment as a matter of law. (citation
omitted.) In reviewing a motion for summary judgment, we view the
evidence in the light most favorable to the party opposing the
motion. (citation omitted.)*' Kaseta v. Northwestern Agency of
Great Falls (1992), - Mont. -, P.2d , 49 St. Rep. 183,
184.
I.
Shubert contends that there are multiple issues of fact and
law present in this case so it was improper for the District Court
to grant summary judgment. Moreover, he argues t h a t the District
Court erred in awarding summary judgment to Firemanls on Shubertls
bad faith claim and Fireman's counterclaim for restitution.
Defendant Fireman's counters that the bad faith claim in settling
the insurance claim cannot exist where the cause of the fire was
arson and that arson voided the insurance policy. Further, it
states that Fireman's was fraudulently induced to pay the losses
and restitution is the appropriate recourse.
Fireman's cites Woodhouse v. Farmer's Union Mut. Ins. Co.
(1990), 241 Mont. 69, 785 P.2d 192, as determinative of this
action. We agree. In Woodhouse, a woman attempted to recover from
her insurance company for personal possessions lost in a trailer
fire. Patricia Woodhouse was coinsured with her ex-husband on the
trailer awarded to him during their divorce action. She still had
many possessions in the trailer when her ex-husband intentionally
burned the trailer, causing a total loss.
Woodhouse filed a claim for the loss of her possessions but
the insurance company concluded that coverage was precluded because
the fire had been intentionally set. Farmer's policy read:
We do not insure for loss caused directly or indirectly
by any of the following ...
h. Intentional Loss, meaning any
loss arising out of any act committed: (1) by or at the
direction of an insured; and (2) with the intent to cause a
loss.
Woodhouse, 785 P.2d at 193. The Court agreed with Farmer's that
the meaning of the contract was clear. Alan Woodhouse, the ex-
husband, was an "insured" and his act was intentional. Therefore,
coverage was precluded for him and Patricia, his coinsured.
The policy provision at issue here states:
This entire policy shall be void if, whether before or
after a loss, the insured has willfully concealed or
misrepresented any material fact or circumstance concerning
this insurance or the subject thereof, or the interest of the
insured therein, or in case of any fraud or false swearing by
the insured relating thereto. (Page 1 of Standard Form Fire
Insurance Policy).
The policy also states:
F. Perils Excluded. The property coverage does not
insure against loss caused by, resulting from, contributed to
or aggravated by:
(11) Any fraudulent, dishonest or criminal acts done
by or at the instigation of anv insured, partner, or
ioint adventurer in or of any insured, an officer,
director, or trustee of any insured ...
(Page 3 of Commercial Property Coverage Policy).
This language is clear and unambiguous. "The property
coverage does not insure against loss caused by ...criminal acts
done by ...any insured, partner . . . . I t Coverage is precluded because
of the arson committed by Dell E. Tyler, the partner of Richard
Shubert. "An innocent co-partner [can] not recover under a policy
where arson was committed by a partner because the language of the
policy specifically barred recovery.. .." Woodhouse, 785 P.2d at
193.
Fireman's argues that the bad faith claim is barred because
the cause of the fire was arson. We stated in Britton v. Farmer's
Ins. Group (1986), 221 Mont. 67, 73, 721 P.2d 303, 307, "[als to
the insured ..., the failure of the insurer to comply with Section
33-24-102, MCA would be unimportant if in fact Britton had
committed arson to cause the loss for then he would not be entitled
to coverage in any event." Here, where the cause of the fire was
arson, there can be no bad faith action and the District Court was
correct in granting summary judgment to the Defendant.
11.
Fireman's argues that it is at least as innocent as Shubert
and therefore restitution is appropriate. Fireman's cites McDonald
v. Northern Ben. Ass'n (1942), 113 Mont. 595, 131 P.2d 479, for the
proposition that when an insurer has paid a claim for loss under a
mistake of fact, it is entitled to recover the amount paid. In
5
McDonald, the plaintiff's husband obtained a certificate for death
benefits from defendant, a mutual benefit association. He
maintained in the application that he was in good health and had
not consulted a doctor within the past five years, both statements
being false. Shortly after McDonald's death, the defendant made a
partial payment to the deceased's beneficiary, his wife. The
beneficiary then brought an action against the defendant for
recovery of the rest of the benefits. Defendant answered that the
statements given were false. The written application, expressly
made a part of the contract stated: "1 also agree ...that no
liability shall exist against the Ass'n. if any of the answers to
the above questions relative to my health on the date below are
found to be untrue." McDonald, 131 P.2d at 483.
The Court concluded that:
"[tlhere is no doubt that a party is entitled to sue and
recover money which he has paid by mistake of fact, or of
mingled fact and law, and which the receiver ought not, in
equity and good conscience, to retain....The fact that the
second payment of $50 was made after the defendant had some
reason to suspect the falsity of the answers to the questions
concerning the member's health, does not affect the
defendant's right to recover the money, not in itself having
the elements of an estoppel, or of a waiver, which latter
consists of the intentional relinquishment of a known
right ...and not apparently having caused plaintiff to change
her position for the worse so as to entitle her in equity and
good conscience to keep the money.''
McDonald, 131 P.2d at 486-487.
The partners obtained the insurance proceeds based on a fraud,
even though Shubert was unaware of the fraud. Under the insurance
contract, the policy was void and the partners were not entitled to
any of the payments made on the insurance loss. Fireman's may
recover the money paid for the fraudulent claim.
Shubert argues that he has had a change of circumstances and
therefore should not be required to pay restitution to the
insurance company. He cites the Restatement of Restitution to
support his argument. Section 142, Restatement of Restitution
states that:
(1) The right of a person to restitution from another
because of a benefit received is terminated or diminished if,
after the receipt of the benefit, circumstances have so
changed that it would be inequitable to require the other to
make full restitution.
(2) Change of circumstances may be a defense or a partial
defense if the conduct of the recipient was not tortious and
he was no more at fault for his receipt, retention or dealing
with the subject matter than was the claimant.
Restatement of Restitution 5 142.
Shubert states in his brief that the insurance "proceeds
received from Respondent in this matter were used to discharge the
outstanding debts of the partnership," and therefore are a change
of circumstances. However, Comment b to Section 142 provides for
exceptions to the general rule. Comment b states:
Where money has been paid which the payee has used for
the payment of debts incurred prior to its receipt, such
payment of debts does not constitute a change of circumstances
which would prevent restitution by him.
Under comment b to 5 142, the use of the insurance proceeds
falls within the exception to "change of circumstances" and this
argument falls.
Finally, § 35-10-307, MCA, reads as follows: "All partners are
.
liable.. (2) jointly for all other debts and obligations of the
partnership ...." The District Court correctly concluded that
Shubert, as a partner, albeit an innocent partner, is liable for
restitution for the insurance proceeds.
Shubert argues that laches, waiver and equitable estoppel
apply to this case and warrant reversing the District Court judge's
order. These issues were not briefed or argued in the lower court
and thus are not appropriate for review. Shubert's answer to
Fireman's counterclaim claims that his third defense to the
counterclaim was laches and his fourth defense was estoppel.
Waiver was not even pled by Shubert. Other than these contentions,
there is no real argument or discussion regarding these issues.
They are not addressed at all by the lower court in its opinion.
"This Court will not consider for the first time on appeal an issue
which was not raised in the District Court." Keller v. Dooling
(1991), 248 Mont. 535, 540, 813 P.2d 437, 441. See also Merriman
v. Merriman (1991), 247 Mont. 491, 496, 807 P.2d 1351, 1354.
Affirmed.
We Concur: /
November 12, 1992
CERTIFICATE O F SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the
following named:
DOUGLAS G. SKJELSET
Attorney at Law
P.O. Box 4102
Missoula, MT 59806-4102
John E. Bohyer, Esq.
Crowley, Haughey, Hanson, Toole & Dietrich
P. 0 . Box 2529
Billings, MT 59103-2529
ED SMITH
CLERK O F THE SUPREME COURT
STATE O F MONTANA