Portland Federal Employees Credit Union v. Cumis Ins. Soc., Inc., 88-3501

• Citation: 894 F.2d 1101
• Decision Date: 25 January 1990
• Docket Number: No. 88-3501,88-3501
• Parties: PORTLAND FEDERAL EMPLOYEES CREDIT UNION, a non-profit corporation, Plaintiff-Appellant, v. CUMIS INSURANCE SOCIETY, INC., a corporation, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1101

894 F.2d 1101

PORTLAND FEDERAL EMPLOYEES CREDIT UNION, a non-profit

corporation, Plaintiff-Appellant, v. CUMIS INSURANCE SOCIETY, INC., a corporation, Defendant-Appellee.

No. 88-3501.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 7, 1989.

Decided Jan. 25, 1990.

Raymond C. Leake, Crane & Leake, P.C., Durango, Colo., Preston C. Hiefield, Norville & Hiefield, and Bartley F. Day, Lindstedt & Buono, P.C., Portland, Or., for plaintiff-appellant.

I. Franklin Hunsaker, Bullivant, Houser, Bailey, Pendergrass & Hoffman, Portland, Or., for defendant-appellee.

Appeal from the United States District Court for the District of Oregon.

Before BROWNING, WALLACE and FLETCHER, Circuit Judges.

PER CURIAM:

Portland Federal Employees Credit Union (Portland) appeals from the district court's entry of summary judgment in favor of Cumis Insurance Society, Inc. (Cumis) on the question whether a fidelity bond issued by Cumis covers certain losses Portland suffered because of its employees' fraud, dishonesty, or lack of faithful performance. The parties dispute whether these losses qualify as losses of "property" as defined by the fidelity bond. The district court had diversity jurisdiction under 28 U.S.C. Sec. 1332. We have jurisdiction pursuant to 28 U.S.C. Sec. 1291. We reverse and remand.

I

This case involves two separate cases brought by Portland, consolidated in the district court and tried together. The facts are undisputed for purposes of this appeal. In case number 86-134 (the loan claim), Hoekstra, Portland's treasurer-manager, disbursed a loan of $62,100.00 to another employee. Disbursement of a loan this large without prior approval from Portland's credit committee violated Portland's policies and bylaws as well as Oregon state law. In addition, the loan was secured by real property for which the appraisal was inaccurately high. Thus, the loan exceeded the collateral's value by an impermissible amount, again in violation of Portland's policies. When the loan defaulted, Portland foreclosed, but sale of the collateral failed to recover the full amount of the outstanding balance on the loan. This action seeks recovery of the difference.

In case number 85-1897 (the building claim), Portland's losses and damages stem from Hoekstra's activities in connection with the construction of a new credit union building. Part of Portland's losses result from Hoekstra's execution of a consultant agreement to build, furnish, and equip the new building. This consultant agreement selectively ignored directives from Portland's Board, and was never shown to the Board. Other losses arose from Hoekstra's purchase of land for the building and his execution of contracts for interior work and general work without Board knowledge or approval. As a result of these improper contracts, Portland acquired a building which it did not need, and which is worth less than it paid.

According to Portland, Chapman, its legal counsel, is also partly responsible for some losses on the building claim. Chapman allegedly gave a legal opinion that the contracts mentioned above were binding, an opinion allegedly motivated by improper activity upon his personal loan (presumably in collusion with Hoekstra).

In addition, Portland suffered losses through interest payments on an allegedly illegal insider loan from the Oregon Corporate Central Credit Union (OCCCU) secured by Hoekstra. Although proceeds from OCCCU loans could be used only for liquidity needs arising from Portland's loan demands and share withdrawals, Hoekstra used the proceeds to meet progress billings for the building project. Portland also suffered $2,000,000 in losses to its reserves. Portland estimates its loss on the building claim at $10,065,431.00.

For purposes of this summary judgment motion, Cumis conceded that the cause of Portland's losses satisfied the requirements of its coverage. In other words, for present purposes Cumis concedes that the claims resulted from fraud, dishonesty, or failure of an employee to perform his duties well and faithfully. The question is whether the Cumis fidelity bond covers the type of loss suffered by Portland.

Both cases were assigned to a magistrate, who consolidated them. Cumis filed motions for summary judgment contending that the type of loss was not covered by the fidelity bond. The magistrate ruled that Portland's losses were not covered and recommended that Cumis's summary judgment motions be granted. Pursuant to 28 U.S.C. Sec. 636(b)(1), the district court conducted a de novo review of the magistrate's findings and recommendations. Portland filed a memorandum stating its objections to the magistrate's findings and recommendations, and Cumis filed a response. The district court agreed with and adopted the magistrate's findings and recommendations, and entered an order and judgments granting Cumis's summary judgment motions. Portland then appealed.

II

We first address the threshold question whether we have jurisdiction to entertain this appeal. This depends on whether Portland's appeal was timely.

Portland suggests that we construe its "Petition for Leave to Appeal" as a timely notice of appeal. Cumis points out that Portland filed the wrong document with the wrong court.

Fed.R.App.P. 3(c) provides that "[a]n appeal shall not be dismissed for informality of form or title of the notice of appeal." Under Rule 3(c) "we are required to broadly construe the notice of appeal provisions of [Fed.R.App.P.] 4(a) ... [and] we have discretion, where the interests of substantive justice require it, to disregard irregularities in the form or procedure for filing a notice of appeal." San Diego Committee Against Registration and the Draft (CARD) v. Governing Board, 790 F.2d 1471, 1474 (9th Cir.1986), citing Cel-A-Pak v. California Agricultural Labor Relations Board, 680 F.2d 664, 667 (9th Cir.), cert. denied, 459 U.S. 1071, 103 S.Ct. 491, 74 L.Ed.2d 633 (1982).

We construe Portland's petition as a timely notice of appeal filed in the district court on the date it was filed with us, pursuant to Rule 4(a)(1). Cumis suggests that even so construed, however, Portland's notice of appeal is without force because Portland agreed to withdraw the "Petition for Leave to Appeal" following the prebriefing conference. Closer examination reveals that Portland did not simply agree to withdraw the "Petition." Rather, Portland agreed to withdraw its petition contingent upon this court's decision to treat its untimely notice of appeal as timely. In effect, Portland has never withdrawn its petition. We have jurisdiction.

III

We review the district court's summary judgment de novo. Poland v. Martin, 761 F.2d 546, 547 (9th Cir.1985). We apply Oregon substantive law. Under Oregon law, the parties' rights and obligations under the terms of the fidelity bond are first to be determined by the contract itself. The primary consideration is to ascertain the intent of the parties. First Far West Transportation, Inc. v. Carolina Casualty Insurance Co., 47 Or.App. 339, 614 P.2d 1187, 1190 (1980). We look within the "four corners" of the document and read the contract as a whole. Denton v. International Health & Life Insurance Co., 270 Or. 444, 528 P.2d 546, 549 (1974).

Whether a contract is ambiguous is a question of law, reviewed independently. Mortgage Bancorporation v. New Hampshire Insurance Co., 67 Or.App. 261, 677 P.2d 726, 728 (1984). This is a threshold inquiry. See Adams v. Northwest Farm Bureau Insurance Co., 40 Or.App. 159, 594 P.2d 1256, 1258 (1979). The construction of an unambiguous contract is a question of law. Timberline Equipment Co v. St. Paul Fire & Marine Insurance Co., 281 Or. 639, 576 P.2d 1244, 1246 (1978).

The district court decided that the fidelity bond was unambiguous, and held that coverage was precluded because Portland's losses did not qualify as "money" as defined in the fidelity bond. The bond contains a definition of "property" that encompasses money and securities among other items. Following the definition of "property" are detailed definitions of "money" and "securities":

1. PROPERTY. Money, securities, bullion, gold nuggets, gold dust, gold ...

2. MONEY. Currency, coin, bank notes, Federal Reserve notes, revenue stamps and postage stamps.

3. SECURITIES. Mortgages and instruments in the nature of mortgages, upon real estate or upon chattels and upon interest therein ... checks, coupons, drafts, bills of exchange, acceptances, promissory notes ...

(Emphasis added.) The court held that Portland's loan claim involved only "a loss from a loan, an item not listed in the definition of money." Portland's building claim involved economic losses or economic disappointment but likewise involved no loss of money.

On appeal, Portland challenges the district court's decision that its losses are not covered by the fidelity bond. Portland does not renew its claim that its losses are covered under a directors and officers liability policy attached as an endorsement to the fidelity bond.

We agree with the district court's determination that the definition of money is unambiguous and that Portland's loss on the loan claim does not qualify as loss of money. Portland's loan claim does not involves loss of currency, coin, bank notes, Federal Reserve Notes, revenue stamps or postage stamps. Where a word or phrase is defined in an insurance policy, that definition is binding on the court. Waterman Steamship Corp. v. Snow, 222 F.Supp. 892, 896 (D.Or.1963) (Waterman ), aff'd, 331 F.2d 852 (9th Cir.1964) (applying Oregon law).

We cannot substitute a more expansive definition of money in order to find coverage. See id. No case of which we are aware, from Oregon or any other jurisdiction, has interpreted loss of "money," so defined, to include the loss Portland has suffered. Portland's reliance on the court's expansive interpretation of "money" in Hooker v. New Amsterdam Casualty Co., 33 F.Supp. 672, 673 (W.D.Ky.1940), is misplaced,...